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We want to buy a second house without selling our current house what's my option?

I was told that the new house will be treated as investment with higher interest rate, do I have any other options to avoid high interest rate? (we both have pretty good credit, thanks.
  • August 28 2011 - East York
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Answers (7)

Good Afternoon,
I see from the below responses you are looking at a town-home and both your current residence and townhome are about the same value.  You should have no problem buying it as owner occupied, with a good letter of explanation explaining why you wish to move to the town-home, maybe it is newer than your current residence and may have less maintenance (i.e. groundskeeping etc.). 
I am a New Mexico broker and I find in ALL of my transactions that if you have a mortgage on your current residence, then you will have to qualify for your new mortgage with both your current and new mortgage payments.  You will also be required to have 6 months PITI (principal, interest, property taxes, and home owners insurance) for each property in reserves as well.  This means that you have to have 6 X  each mortgage payment in verfied funds that are available to you (ie. 401-K, savings etc). 
The only way you can use any rental income (75% max) and reduce the 6 month PITI requirement to only 2 months, is if you have a minimum of 25% equity in your current residence. 
If you own your home free and clear in most cases you WILL NOT be able to use rental income unless you have a documented 2 year landlord history. 
I know this was lengthy but buying a home while having an existing mortgage is complicated these days.  If I were you, I would contact a reputable mortgage broker in your area who will be able to clarify if the same underwriting guidelines apply for you in East York.
Hope this was helpful.

  • August 30 2011
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If the new house is going to be your primary residence than it will NOT be treated as an investment and you will be able to get whatever kind of owner occupied loan you and the property will qualify for, conventional, FHA, etc.
If you still have a mortgage on your current home there may be issues there such as if you are required to occupy that property, etc. If it is paid off you can simply rent it out and as Rudi indicated and use part of your rental income to qualify for the new loan.
  • August 30 2011
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That really depends on an abundance of factors Joyce.   Are you going to be renting out the old one?   What type of property is the old one?  The one one?  If it makes common sense that you would be buying it to move in, then there is a very good chance it would not have to be moved to investment.   If it is though, the rates are investment properties are only slightly higher than owner-occupied and still much much lower than the historical averages for buying owner occupied residences.  It's treated as a case by case kind of thing.
  • August 30 2011
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You can purchase a new primary residence. You can also use 75% of your rental  income or Form 1007 to qualify if you have 30% equity in the vacated property.

You will also need a minimum of 6 months reserves in the rental and two months reserves on the purchase.
Happy funding, Rudii
  • August 29 2011
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well, you can only have 1 primary residence. If you establish the new home as your primary, I don't see what the problem is. You're allowed to move to a new primary residence, and the cost of it  (whether it is more or less than your current home) is irrelevant.

Wil you be using both homes, or renting out the first one?
Speak with your mortgage lender to see how this can be handled.

I am hoping you have already checked into obtaining a new mortgage, since you will have to qualify for any 1st loan your have combined with the new loan.

Best wishes...........
  • August 28 2011
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We are not selling soon, the new one will be the primary residence and it's a townhouse under construction and current house is about 60 years single family, both worth about the same and are within 15 miles, thank you.
  • August 28 2011
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Are you planning on selling your first home anytime soon? Which one is going to be your primary resident? And is the home you are trying to buy an upgrade compared to the first one or a downgrade?
  • August 28 2011
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