Do I need a 10% minimum down payment on a new primary residence?

Question

Hey everyone! My wife and I are planning on buying our next primary residence and converting our current primary residence to a LTR.

We will be developing a lease agreement to have the ability to purchase our new primary residence. Is there a minimum down payment we need or will this new primary residence be seen as a first home purchase and we can use a FHA loan or perhaps a 5% down payment using a conventional loan (which we did on our first primary residence).

I hope I am asking the question correctly. I look forward to your advice and suggestions! Thanks!!

Jose Rocha · Answer

@Bill Schrimpf thank you very much for the detailed explanation! I will definitely consider these options.

Chris Mason · Answer

FHA loans are great for the 2-4 unit aspect, but for SFR they generally do not make sense if you have good credit.

But that's ok, because in the SFR space, you can do 5% down conventional over, and over, and over, again, once a year. That's not just for FTHB, and people that own a rental or two aren't excluded either. The successive owner occupancy requirement is one year each time.

Caroline Gerardo · Answer

What type of loan and loan to value on existing house? Where do you both work and where is location of proposed house? You will need a lease and deposit check at closing and likely an appraisal ordered by lender and rent survey on existing house to match.

Eliott Elias · Answer

Get with a lender on this, I know you can't use two FHA loans at a time unless your wife takes one out.

Darian Sanayei · Answer

I think the 100 mile distance rule is new for the FHA requirement. I would look into that if I were you

Jose Rocha · Answer

@Darian Sanayei we currently do not have a FHA loan, so we still have the ability to use one. I do think we plan on using one as we can at least come up with a 5% down payment. We are about 70mi where we would like to purchase our secondary home.

Caroline Gerardo · Answer

If you need a Realtor to provide comps (which you need to show you have equity in current house) I can give you some names. It's good to know this BEFORE you start as this part is vital.

Your jobs need to be in Canyon Lake/Menifee easy driving distance to be owner occupied.

To buy conventional (depending on lender's overlays) you should be able to get a CONFORMING loan under $647250  with 5% down IF your FICO is high and you have reserves. For a high balance loan you will need to put more down payment 10 -20 depending on lender's overlay rules.

Jose Rocha · Answer

@Caroline Gerardo in our current home we have a conventional loan and will most likely be the case for the next one. I am not sure on the LVT at this moment of our current home. We are looking to move to Riverside County, specially Lake Elsinore, Menifee area. We both have good W2 jobs as she is a nurse and I am an engineer.

She was actually the one that told me we need a lease agreement setup to show the current home will no loner be our primary residence but we didn't know we needed a deposit from the tenant.

Jose Rocha · Answer

@Eliott Elias would it be an issue if we are both on the mortgage to qualify for the loan amount? In our current home, we didn't take out an FHA loan so we don't have home right now.

Do I need a 10% minimum down payment on a new primary residence?

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