How to Buy an Investment Property When I Have Two Mortgages
I want to buy an investment property but I currently have two mortgages that I pay (for my primary and second homes). I have equities of about $500,000 from both. What possible financing options do I have? Any ideas or suggestions are appreciated. Thank you.
@Rochelle Agitan, what state are you looking to buy in? Also, will you live in the property? If you're going to live in the property, FHA could be a good option depending on your debt to income ratio. DSCR would be a great option for you if you aren't going to live in the property. DSCRs are loans that only use the actual or projected rental income (from the appraisal), your credit score and your down payment to qualify. These type of loans help to supercharge wealth as you don't have to worry about qualifying based on income.
@Stacy Raskin, thank you for your reply. I am looking to buy in California. DSCR sounds like a great option. Do I need to be preapproved first for DSCR before looking for a property? How much is the down payment? What interest rates do you have?
@Stacy Raskin, I don't plan to live in the property but if I need to and if I save or have more discount, I can do that. I plan to rent it out.
@Rochelle Agitan, if you live in the property for at least a year and you can qualify based on debt to income and credit, FHA or conventional can be a good way to go. DSCR is great for those who will not live in the property or who have debt to income ratios that won't work.
@Stacy Raskin, I will email you. Thank you.
You've got great options from that equity via refi or HELOC. But if that's not what you want it's all about learning to find discounted properties that private/ hard money lenders will finance 100% or at least 90% of purchase price on. From there you can brrr, flip, or even just do value ad rolled into a rate term refi. The real trick for all of us is to not just see how much money or liquidity you have but to get better at finding other peoples money.
#3 BRRRR - Buy, Rehab, Rent, Refinance, Repeat Contributor
- Investor
- Austin, TX
- 5,506
- Votes |
- 9,861
- Posts
#3 BRRRR - Buy, Rehab, Rent, Refinance, Repeat Contributor
- Investor
- Austin, TX
You will use what's called a DSCR loan
Quote from @Rochelle Agitan:
I want to buy an investment property but I currently have two mortgages that I pay (for my primary and second homes). I have equities of about $500,000 from both. What possible financing options do I have? Any ideas or suggestions are appreciated. Thank you.
How long have you owned the properties? If you have income on your tax returns from renting out the second home, that can go towards offsetting the mortgage. I would work with a lender who can do BOTH conventional and DSCR loans. See if you can get prequalified conventionally first. Terms are better (no prepayment penalty, lower rates, etc).
There is a conventional investment home loan that also might work for you. Feel free to reach out if you have any questions!!
- 262.955.5168
- https://barrettfinancial.com/lzwirlein
- [email protected]
Hi @Rochelle Agitan, I would highly suggest looking in to getting a DSCR Loan as it will not take into consideration of your income. The qualifying income will be based on current rents if tenants are in place or market rents if the units are vacant. To get the best rates you will want to have a 1:1 ratio, meaning the rents will cover the mortgage. Some lenders can even go lower than the 1:1 ratio. You will also want to have an LTV of 75% or less. The DSCR Loan would most likely be the best way forward to meet your goals.
-
Lender California (#02103914)
- 619-340-5632
- http://www.Simpson-Team.com
- [email protected]
@Rochelle Agitan its been stated but a DSCR loan would be a great option if you are concerned about your DTI.
To take a step back, a DSCR loan, aka lite doc or business purpose loans, uses the rents you receive on the property and divided by the new loan PITI to receive a ratio. Simple math would be a PITI of 1,000 and rents of 1500. That would be a debt service cover ratio of 1.5. Basically, this property cash flows. FICO, experience, and LTV are also factors but this is the basis of the loan. No need for tax returns, Verification of Employment, or income. I have been through this loan as an investor myself and originate these loans all the time.
DM with questions as Im happy to help.
-
Lender CA (#02115256) and NMLS (#1993906)
- Investor Property Loan
Thank you, @Jonathan Taylor!
Thank you, @Dan Garrigus!
Thank you, Lyndsay Zwirlein! Primary is 10 years, secondary is going to be 1 year in 2 months.
Thank you, @Nate Sanow!