Trying to determine best approach for getting 2nd mortgage

3 Replies

Hello All,

So I purchased a 4 family home several years ago for $455K with my girlfriend with an FHA loan, only putting 3.5% down and have rehabbed it to the point where 3 units are rented out while we live in the 4th unit. The rental income from the 3 units alone completely covers the cost of the mortgage so if we were to rent out the unit we reside in, I estimate we'd have a surplus of $1400 a month accounting for an avg. of $500 put aside for monthly maintenance expenses.

I haven't appraised my home since the purchase but based on recent comps, and the # of years I've had the existing mortgage I'd estimate to have approx. 50K in equity.

My girlfriend and I would now like to purchase a single family home. We both have descent credit scores (above 750 Fico), nominal amount of debt, have a combined income of $125K (I earn 80K, she earns 45K) and would like to get some feedback to determine the best approach when applying for a second mortgage. Ideally I'd like to have 20% down for the 2nd home but would also like to know if there are other options available with putting less down. Any advice is appreciated.

@Brick Biermann  If you are buying the new property as a primary residence, then you can use all options. Depending on the price, you might be able to go down to just 10% down. Also, given that you have been rending for a while, you will be able to use your rental income for DTI. Since the rent will cover the mortgage for the current property, you only need to worry about qualifying for the new property.

Upen Patel

Federal NMLS# 1374243

Thanks for your reply Mr. Patel. Just so I'm clear on the matter, could the 10% down option be available for both conventional and FHA loans? I'm sure it's available for FHA but would the fact that it's 10% down instead of the allowable 3.5% eliminate the rule of paying MIP for the life of the loan?

@Brick Biermann  WIth FHA loans, 3.5% is the min. You can put more down. Depending on the loan term and LTV at origination, Yes the FHA MIP can be removed in 11 yrs.

Upen Patel, Mortgage Banker

Federal NMLS# 1374243