Will I qualify for another mortgage?

Question

Hey, I'm a new investor and I purchased a home about a year ago with the help of my dad. He cosigned on the house with me because the mortgage was more than I qualified for by myself. I've been saving up for a down payment on another property to house hack. I want to get this property on my own without my dad as the cosigner. I plan on renting out my current house and using the income to cover the mortgage. That should leave me easily a couple hundred extra every month. If that was the case, would I quality for another mortgage since the income from this property would cancel out the debt and hopefully reducing my DTI. I have not had the chance to talk to a mortgage lender, but if anyone could give me some insight it would definitely be appreciated!

Theresa Harris · Answer

Has your income increased or your debt decreased?  If you couldn't qualify for a loan on your own a year ago and nothing has changed, I'm not sure you'd qualify now.  Go and talk to the bank and find out.

Greg Scott · Answer

Your bank may not be. Smaller is better.

Speaking about banks in general, in my experience, big have gotten worse rather than better.  The big ones are just money factories, they arbitrage yield and try to generate fees, and love cutting costs, including payroll. They would love to hire the lowest paid person possible for the job.  Unless you are lucky enough to reach the RIGHT person at a large bank, you are most likely to get an uneducated answer to a real estate question.

I have personally been told "It is illegal to have more than X mortgages" by bank loan staff, even though that has never been true in the history of the United States.

Hung Dang · Answer

Thank you to everyone for giving me some more insight! I was wanted to get some more knowledge before speaking to a mortgage lender and you guys were of great help. Thank you again

Greg Scott · Answer

Typically 75% of your rent counts towards your income.  However, if you walk in to a bank, they won't understand this.  Talk to a mortgage lender that understands rent properties.

If you are buying rent properties well, it is often easier to qualify for your next one.

Benjamin Sulka · Answer

^ great answer above

Also, make sure to calculate all of your expenses when you're determining what your cash flow is. Other than just the mortgage, you must consider taxes, insurance, capex, maintenance, vacancy, potential lawn and snow care, etc.

Make sure to include all of these numbers when doing your calculations! All the best to you!

Ron S. · Answer

well...there are idiots all up and down and sideways in every organization. I'll give you that.

Alecia Loveless · Answer

@Hung Dang Hi Hung, I have been using my local bank where I have had my accounts for 27 years to get my mortgages with. They have been great to work with and have actually had some of the best rates available. They are a little more conservative than a larger bank might be but they don’t sell their mortgages so for the life of the loan I can expect it to stay in house and know I can get a local person to help me if I need help with the loan for any reason.

That being said I think the whole bank, there’s maybe 15 branches only did 175 total mortgages last year and I had 3 of them. It’s been a great experience and I highly recommend you trying a smaller bank or credit union if you haven’t and maybe when you’re talking to them tell them you’ll be happy to open an account there and keep some money there or will put the business accounts associated with the new rental property in their bank to give them some more skin in the game.

Ron S. · Answer

I would say with confidence, we banks aren't as dumb as we used to be. If you have a bank that knows what they are doing, they can do everything a broker can do and more, considering they can portfolio a loan whereas a broker can't. I agree that many banks don't have the breadth of talent some brokers have but get the right one and the opportunities are better than brokers, in my experience.

Benjamin Sulka · Answer

No problem!! Good luck, Hung.

Will I qualify for another mortgage?

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