Profile picture for lmxu

Two primary residences?

Hello All:

Here is my situation. I currently own a townhouse in Fairfax which I bought before marriage and my parents used it as their primary residence as well, even though they lived overseas for quite a few years.

I got married, got a kid, my parents decided to move back to the States, but of course, living together cause issues and we decided it's the best for everyone if we are to buy a second smaller home, so my wife and I can move out while they still live there. We don't want to sell the house as we don't need the money right now and I like the location. 

So in this case, when I request loan on the second house, is that a primary residence or will it be an "investment property"? We will live there, no rental income from neither houses, so is this a tax issue or simply an issue with the loan underwriter?

Thanks






  • November 21 2013 - Fairfax
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Answers (4)

Correct, the property you are buying and intend to occupy will be considered you primary residence.  All you will need to do is write a letter of intent regarding the property your parents live in, a letter explaining why you are downsizing, and show reserves for the property you are vacating (since it will now be considered an investment property).  Standard reserve requirement is 2 months mortgage payment if you only own 1-4 financed properties.  As long as you can qualify for both mortgage payments, you do not need to prove rental income.  If you cannot qualify for both mortgage payments and need rental income to qualify you can use new rental income if:  1.  You have a signed lease for at least 1 year 2. The property has 25% equity  3.  You collect first month's rent and one month security deposit 4. The property you are vacating is currently your primary residence.

Hope this helps...let me know if I can help you get financed.  Contact me through my profile and I will be happy to help.  I am local in MD/VA/DC.
  • November 22 2013
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Since you will be living in your new home, it will be considered your primary home. This should allow you to apply for loans like FHA. I suggest you speak with a lender like myself who would be glad to speak with you to help you get the loan that you need. If you have any further questions or if you would like a loan, feel free to contact me.

Good Luck!
  • November 22 2013
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Profile picture for lmxu
Thank you Mr. Carron.

Thanks for your help! Yeah, the income of my wife and I should be more than enough to cover both houses, so we won't be needing any rental income to help us on that end.

I was more concerned about if we can actually treat the new home as primary home while still maintain the old home as is and looking at your answer, if money is not an issue, then seems like we can..

Okay. I'll talk to the lender about my situation, looks like should be smooth.
  • November 21 2013
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Profile picture for CCarron
If the new home will be the primary residence of the people buying it (you and your wife), then the loan will be owner-occupied not investment. However, if your loan on the townhouse is a Veterans Administration loan, you may not be able to get another VA loan without paying off the one on the townhouse.  Regardless of the type of loan, the lender will look at your and your wife's income, your credit scores, and your debt, including the mortgage payment and real estate taxes on the townhouse, to determine how much you can afford to borrow on the new home.  Even if your parents are paying you rent while they live in the townhouse, the lender may not take that into account unless they have been paying it for a certain number of months, and even then, the lender may only take into account a portion of the rent as "income" to you because rental situations can change. In any event, I suggest you get preapproved for a loan, explaining the situation to your bank or mortgage broker. If the first one you go to is unhelpful, go to another. . . . If your parents are paying you rent, check with your homeowner insurance company to see if you need a landlord-tenant policy, especially after you move out; and check with your tax advisor regarding reporting the rental income and expenses, including depreciation.  If this answer was helpful please click the thumbs-up below.  
  • November 21 2013
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