How to prepare for my second deal

11 Replies

I have an FHA loan on a duplex where I live already. I am wanting to start preparing for my second deal. I have heard different things about conventional loans.

What percentage down payment should I prepare for? (I have heard anywhere from 5% - 20%) 

What other things will they look for if I were to seek out a second mortgage? Preparation advice? 

Prepare for the highest I would say 25% down they will also look at your debt to income ratio as well as everything they looked at the first time, credit, income etc.  Also depending on the type of property they may consider income from that property as well.

@Ryan Davis - congrats! You are correct & some of it depends on your situation. 

A couple of things to think about and look into: 

  • is your current rental property "seasoned"?
  • what is your DTI?

@Jay Helms Thanks for your response. My current FHA is seasoned until April. My DTI ratio is 23.85%.

@Aaron Klatt Thanks, if I have to wait until I have 25% down, that wont be for a while. I would say a few years at least. 

@Jay Helms why do you ask if it is seasoned, would you advise on refinancing the FHA into conventional?

Originally posted by @Ryan Davis :

@Jay Helms why do you ask if it is seasoned, would you advise on refinancing the FHA into conventional?

Most banks won't recognize rent revenue (thus affecting your DTI) until a property is seasoned. And each bank has its own definition of seasoning. I've witnessed 6-18 months.

There may be other owner financing or private financing options in your area that require less down ,but I'm not familiar with your area so I can't say whether that is realistic or not.

@Ryan Davis

Have you looked at refi your fha to conventional? Then use fha again?

@Steve Bracero I have thought about it for sure. May be a great option. Thanks! 

@Ryan Davis I agree with what @Steve Bracero suggested. Refinance into a conventional loan with your first property. You'll get rid of the mortgage insurance. And could even lower your monthly payment = more cash flow with that property. Then reap the benefits of the low down payment FHA all over again. Rinse and Repeat! lol, keep in mind, though, that you're "required" to live in the property for at least a year with the FHA loan. And also consider, that the better your loan to value number is, the better REFI rates you can get! Good luck as your prepare for your second deal! :)

If you are at all able to get private money to do your deal, you can use the BRRR strategy to get into a property with better sweat equity opportunity, then refi and cash out your private lender. Going into the bank with a signed lease will also help your chances. Good luck!!

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