Buying a second home, do we qualify?
Hi,my wife and I owe $140,000 on our current home, about what it is worth in the current market.We are considering buying a second home, we will most likely keep our first home, though we could attempt to sell it within 90 days after closing on the second home.The question I have is how much we would qualify for on a new mortgage, and what the best way to go about it is.Our current payment is $1100 p&i. We do not pay escrow and pay about 4k in prop tax and homeowners ins.The second home would cost $155k, we want to put 10% down, we currently have about 68k in cash and equivalents (mostly cash some stock/bonds) and two car payments totaling $625 a month, and some credit card debt (about 10k at 1.9%). Taxes and insurance on the new home would be about 4k. Our combined earning are about $120k annual and we are federal gov't employees (very secure jobs)Would I qualify for this new mortgage, should I tell the lender I'm considering it as a second home or selling my current home? Should I pay off the low interest CC debt? Or put more down?Any thoughts or advice is greatly appreciated.thanks by matthew_524 from Memphis, Tennessee. Jun 21st 2011
Gianni Cerretani (mortgagegodfather)
#32 ranked lender in Georgia - 238 contributions
Great questions and thank you for supplying so much detailed information: The biggest question is are you going to occupy this new home as your primary residence? If you are then you can put as little as 3.5 to 5% down. If it is going to be a true second home then you would need to put down 20% minimum. If either one of you are veterans you would be able to take advatage of 100% financing on a VA loan. the best thing to do is have a full application ran by a local loan officer that you trust.
Chris Gummerson (cgummerson11)
#397 ranked lender in California - 648 contributions
When you a purchasing a home that you will not be occupying or as a second home, you would need to put 20-30% down. If you are upgrading or downsizing because kids are gone, then a lender will allow you for owner occupied financing. The problem is your current home. If you purchase another home and plan to live in it, then you would have to cover both mortgage payments. Since you dont have 30% equity in your current home, a lender will not accept rent payments to offset your DTI. So if you can qualify on both payments, go for it. If it would be to tight then look into selling your current home. Most lenders will approve your loan, then wait until your current home sells before they fund the new loan.
Nancy J Releford (nancyreleford)
#4 ranked lender in Tennessee - 233 contributions
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Nancy J Releford (nancyreleford)
#4 ranked lender in Tennessee - 233 contributions
The question is where is the 2nd home in relation to your current home. In this mortgage environment, Lenders usually are requiring the 2nd home be more in a resort community to essentially count it as a 2nd home. You could finance the new property as a principal residence. If you can make the downpayment without selling your current home. What they would require is a copy of the MLS listing on your preoprty you're selling & qualify you with paying both mortgage payments into your DTI. If you qualify then I see no issue.If your current home is not an FHA loan then you could qualify for that if all of the above falls into place. Let me know if I can help!Nancy J RelefordHome Equity Mortgage, LLC615-867-3060
Jeff Hutchison (jhutchison)
#14 ranked lender in Iowa - 40 contributions
I would look at doing an FHA loan for the new home as a primary residence, and put your current residence on the market. Our FHA program allows for expanded debt to income ratios with compensating factors such as credit scores, assets, job history etc. Our fha 30 year fixed is at 4.25% currently.
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