Let me try to lay out our situation.
My fiancee and I are looking at 2-4 flats in our area (north / northwest side of Chicago) to buy and owner occupy, renting out the other units. We have been pre-qualified for a mortgage no problem - we both have excellent credit (>750 each), both have long term work histories, etc. Basically, we are low risk borrowers. I own a rental house in southern Illinois (mortgage paid off). She owns a condo on the north side of Chicago which we have been renting out for about 9 months now, she moved in with me (I currently rent) after living in the condo for about 9 years. There is about 10% equity in the FHA backed loan on the condo, and we had planned to pay off another 10% of the loan value to get to 20% equity for the refinance.
Now, to buy a new place we plan to use FHA as 5% down for a multi-unit would be no problem with our cash savings, but 20% down for a conventional loan isn't happening with our wedding 5 months away, and the honey moon after. As the condo is now considered an investment property, the lender we have been working with states "A "full review" is required for any Fannie Mae or Freddie Mac purchase or refinance with a ltv or cltv above 80% (so...less than 20% down payment or less than 20% equity). Full review is also required for a purchase or refinance that would not be owner occupied (investment).
The "full review" requires a copy of the budget. So in any of the above cases... The mortgage would be denied based on the sole fact that the proposed 2015 budget puts less than 10% of the total annual budget toward reserves for future expenditures."
The condo association will not increase its reserves from 8.5% to 10%.
So, we are at a loss as to where to go. Do lenders have different requirements for a "full review" for refinancing the condo? Can we get an FHA loan together if she already has an FHA loan? Would I need to get the FHA mortgage on my own? Do we need to move back into the condo once the current renters lease is up, refinance it as our primary residence, and then we can buy a new place? We plan on buying a place soon, before we get married, if that makes a difference.
@Todd Michaels , you are posting interesting questions, and only lenders can answer. I'll send your questions to a friend of mine, that's top lender for Chase in the Midwest area to see what are the answers and will send them to you directly.
Message me if you have any other questions.
Lumi Ispas, Century 21 SGR | [email protected] | 773‑392‑2906
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