Refi existing house at the same time as new loan for a new house?

Question

Hi all, just wondering if I could get some insight from those that have gone before.

I bought a rental 4 years ago, payments amortized over 30 years but the lender would only give me a 5 year term (I think they have the choice to either call the loan due or renew it for another 5 year term at whatever the going rate is at the time). So I have one more year left.

I want buy another property but I don't have enough spare cash (which is approx 10k) to cover the full acquisition costs . But there's about 42k in equity in the rental (bought it for 100k with 30% down, it's appreciated at 3% for 4 years, so is now worth 112k which agrees with recent tax assessors appraisal).

So I have 52k (10k+42k) to work with. If my credit is good enough to secure 20% down (80% LTV), 22.4k (112k*.2) secures the existing rental, meaning I have 29.6k (52k-22.4k) left over to play with. At 20% down, this means I could buy a 148k house.

[I don't know if it's relevant to my questions (see below) but I also own two other rentals, loans held by the same bank as the first, one at 20% down and the other at 25% down.]

Now for my questions:

• is the math right, or am I overlooking some fundamental lending practice?
• is it possible to combine a refi with a new loan for a new house?
• (the tricky one) will a 740-780 range FICO score secure 20% down? (credit summary: 2 accts; #1 is authorized user [AU] acct, 12 yrs old, 35k line, $4k balance; #2 is new credit acct, 2 mos old, 8k line, $0 balance)

If after reading #3 you think I'm building credit up from scratch in the US, you'd be right: got my dad to add me as AU to his 35k acct, then opened one of my own (the 8k line), and may open a third here in a month or so (AMEX transfer from Australia). May even get dad to add me to another one of his mature lines to boost my AAoA. I'm just not sure if the bank will see through the AU trick.

Any and all advice, comments, observations, tips, warnings, etc welcome!

Thanks, Lance

Account Closed · Answer

You should expect 75% LTV always. You may find a small bank with other rules but it will be rare.

Account Closed · Answer

Your math might be a bit off for a cash out you will be hard set at 75% LTV. And you could purchase at less than 75% LTV the rate takes a large hit as well as lower loan amounts so you might end up paying points on the rate.

Some banks will do odd things putting them into one loan but that is going to be far out of the norm and likely not for that price point. You could do both paced to fund the purchase however some banks are slow on REFI for whatever reason so talk through that first. There are more hoops you will need to go through but these are the ones I see from your post.

Lance Luvaul · Answer

Cool, now I can modulate my expectations! Thanks for the feedback Bill

Lance Luvaul · Answer

Thanks @Bill Walton. So cash out at 75%, or purchase at less than 75%... and those values are largely due to the pricepoint? Interesting. What if I used all 3 of my existing properties in the transaction: 112k (46k equity) + 102k (24k equity) + 110k (29k equity). Would it improve the LTV since it's a larger loan? And at what point does it begin to fall into commercial loan territory?

Lance Luvaul · Answer

Hmm, 9 hours and no comments on my post yet... I must have made it too long-winded :)

So here's a summary: Can I combine a refi on an existing unit with a new loan on a new property? Is this typical, and what can I expect? And do I stand a realistic chance of doing this with a trad lender (community bank) given my newbie credit history? Credit: ~760 FICO, but used some tricks to get there (Authorized User on parent's established credit line). I have 3 loans on 3 units with the same community bank (but I only want to use one in this transaction).

Thanks for your help, Lance

Refi existing house at the same time as new loan for a new house?

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