Classifying potential buy as primary or investment property

[Tyler Youtzy]

Hello all, first post.

Im looking to buy a new primary home while I still have another property on the books and not sure how it will be treated in a mortage.

I will explain the best I can and start with some background.

I'm currently deployed, and going through a divorce that should be finalized by the time I'm back home. I'm getting the house in the divorce, but I will have to split the equity. Ultimately I would like to utilize this home to get my foot in the door to real estate investing. Because of the drastic rise in home prices and interest rates, and not knowing exactly what the home will appraise for just yet, I dont know whether or not I will be able to pay the difference in equity out of pocket to my ex, or be forced to sell the property as refinancing out the difference in this market is not fiscally reasonable option for me.

One way or another, I will not be treating that house as a primary residence within the next ~6 months as I'd like to be completely moved out and it will either be utilized as a 1031 or a rental. That being said, as I'm looking for loans for a new home purchase that I intend on moving into. Am I able to get the cheaper rates that go along with primary home loans, as this is my ultimate goal/intention, or will the underwriters push that it needs to be written as an investment property that needs 20% down?

I can afford to pay the 20% on the house, but would much rather utilized the 0/low down payment of a VA loan.

Any advice is appreciated, thank you.

[Paul Defngin]

Quote from @Tyler Youtzy:

Hello all, first post.

Im looking to buy a new primary home while I still have another property on the books and not sure how it will be treated in a mortage.

I will explain the best I can and start with some background.

I'm currently deployed, and going through a divorce that should be finalized by the time I'm back home. I'm getting the house in the divorce, but I will have to split the equity. Ultimately I would like to utilize this home to get my foot in the door to real estate investing. Because of the drastic rise in home prices and interest rates, and not knowing exactly what the home will appraise for just yet, I dont know whether or not I will be able to pay the difference in equity out of pocket to my ex, or be forced to sell the property as refinancing out the difference in this market is not fiscally reasonable option for me.

One way or another, I will not be treating that house as a primary residence within the next ~6 months as I'd like to be completely moved out and it will either be utilized as a 1031 or a rental. That being said, as I'm looking for loans for a new home purchase that I intend on moving into. Am I able to get the cheaper rates that go along with primary home loans, as this is my ultimate goal/intention, or will the underwriters push that it needs to be written as an investment property that needs 20% down?

I can afford to pay the 20% on the house, but would much rather utilized the 0/low down payment of a VA loan.

Any advice is appreciated, thank you.

 @Tyler Youtzy, first off, sorry that you are going through this. Second, thank you for your service. Is the house currently an investment property? You mentioned treating it as a 1031 exchange? You can absolutely purchase another primary home using your remaining VA entitlement or 2nd tier and may not need zero down or maybe a down but not necessarily 20% down. It depends on where your existing house is and where you're buying your next home. I recommmend first is arrive at what the ex would want for her share. Then, speak with a lender to go over your specifics on how to pay her out and also goals of owning the next home and if you have any questions feel free to reach out. Hope that helps.

[Andrew Postell]

@Tyler Youtzy some good suggestions above. If you are buying your next home as a primary home you can certainly still use a VA loan with 0% down. A primary home is one that you will occupy. There might be a condition to show that other home rented. But if it is currently a rental property, then as long as you are claiming that rental income on your tax returns you should be ok in that aspect. But this certainly sounds doable even though you have a lot of moving parts currently. Once you get closer to getting everything worked out you should have a better idea of what to ask for on your next property but it sounds pretty reasonable to me.

[Dave Skow]

@Tyler Youtzy- thanks  1)  you will need to occupy the new home within 30 days of purchasing it ...if your ability to occupy  will be   several months  into the future  - many lenders  will have an issue   2) In order to offset the present home you own with  rental income -  you will need to provde the lender with the new signed lease  froma  new tenant  ...otherwise - the  full payment will be used in  qualifying ratios 3)  if there has been any formal documents  recording regarding the  pending  divorce  - this will likely  cause lenders to  require the  divorce is   finailized before any new closing can occur

[Tyler Youtzy]

Quote from @Dave Skow:

@Tyler Youtzy- thanks  1)  you will need to occupy the new home within 30 days of purchasing it ...if your ability to occupy  will be   several months  into the future  - many lenders  will have an issue   2) In order to offset the present home you own with  rental income -  you will need to provde the lender with the new signed lease  froma  new tenant  ...otherwise - the  full payment will be used in  qualifying ratios 3)  if there has been any formal documents  recording regarding the  pending  divorce  - this will likely  cause lenders to  require the  divorce is   finailized before any new closing can occur

Thank you for your answer. For your first point, will any lenience be had with lenders considering that I'm deployed on active orders? If I were to have some friends begin to move things in for me, would this be sufficient? Or do you see the process as being more of a hassle than its worth, and think waiting until Im back home would ultimately be the best decision? For your third point, I'm not sure what the laws are like in Washington, but in Virginia, very detailed separation agreements are signed that outline the exact nature of the separation to include property and realestate. Does having this paperwork already signed make any difference? Or do lenders lenders want and expect the complete finalized divorce?

[Caroline Gerardo]

As to the divorce {{sorry}} You need a decree that is court ordered saying what you owe. This spells out the sell or rent of the existing house, alimony, child support... It might be cleaner and easier on you to sell that house. If the order says rental you need a lease and the deposit check cashed lining up. Until your divorce is final lenders will require her to sign off to not be on title. Would she sign??? As to buying with whatever your remaining entitlement is - need to know that amount. Selling the existing house frees up 100% of your VA entitlement if you used it. You can buy owner occupied. The contract needs to be market as owner.