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What is required to qualify for a second mortgage?

My husband and I bought our condo in 2008. We recently tried to sell, but similarly sized properties were selling for $25-40,000 less than what we would need to break even on our loan and pay our realtor's commissions (not to mention paying back the rest of our first time homebuyer's loan). We decided to take the place off of the market and we would like to rent this condo out. We probably will get enough from a renter to cover the mortgage, condo dues and taxes without much leftover. We have been saving for a long time and would like to buy a larger home to live in. I have heard mixed information about what a bank would need to pre-qualify us for another mortgage. If we can show we have a renter with a lease signed is that enough? I recently heard we may need to show our renter's income on our tax return. If anyone knows of all of the possibilities we may come across, please share!
  • July 20 2012 - Philadelphia
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Answers (5)

Profile picture for Fred Glick
Your welcome!

Good luck.

Fred
  • July 20 2012
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Profile picture for user948904
Thank you! I was just told by a neighbor that his friend was not able to obtain another mortgage because the bank wanted to see that he was able to rent his initial property for 2 years prior to them approving him for another mortgage. We have $194,000 left on our loan and based off of mortgage calculators (if we didn't already own a home),  we'd qualify for about $450,000. Our average monthly income is about $10,000 before taxes and our only required payments are $500/ month in student loans. I am hoping that if we don't aim to purchase too high, we should not have an issue, but I was concerned for the possibility to have to show rental income prior to being able to obtain another loan.
  • July 20 2012
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Fred's answer is correct Tim - user948904
  • July 20 2012
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Profile picture for Fred Glick
The way it works is that if you do not have 30% equity (which you don't), they can't count the rent.

So, you must qualify based on the mortgage payment for the new house, your other debts PLUS the current mortgage/condo fee.

But, if you do qualify, there are low down payment loans with FHA (3/5% down) as long as you do not have an FHA mortgage now.

Best of luck to you.

Fred Glick
NMLS #133975
  • July 20 2012
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Never heard you needed renters income, usually a lease will be all that's needed. You will just need to qualify for a loan based on income vs debt and the old loan can be taken care of with the renter. Go speak with a lender to get all the details and current rates.
  • July 20 2012
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