Purchasing the second home (Getting the ball rolling)

22 Replies

I recently paid off my home and i am interested in purchasing another home/duplex for the rental income. Banks are telling me that because i own a home i would have to pay 20-25% for the down payment because it would be considered a second home. Would it be possible for me to transfer the home to an LLC or a land trust that i own and then when i go to the bank i would technically no longer own a home and wouldn't have to do the 25%down payment? Is this legal/ethical?

I am not trying to break any rules i am just trying to think creatively to overcome obstacles. 

That would be considered mortgage fraud if you withhold information from your loan application with intent to obtain terms from the lender that were better than if they had known about your primary that you transferred into the land trust (LT).

In truth, you will still be asked about the primary residence since you've already financed it in your personal name on the onset. When you finance a property or run your address through a credit pull the bureaus are stamped with that information in the record books for up to 10-30 years.

I've had borrowers who had addresses that they lived at 20-30 years ago being asked about when it came up on their credit reports.

so while the property is technically in the name of the trustee while in the LT it will pop up on your Skip tracer report when your lender runs their Lexus Nexus or TLO report and you'll have to explain and document the expense (otherwise = mortgage fraud).

Regarding 20-25% down for this second property, thats not true 2nd homes can be bought for as low as 10% down but the lender has to believe the property is a second home and the property is 1 unit or less (no multi units for second homes other wise its a non owner occupied/investment property hence the reason you are probably being required to bring in 20-25% down its because they countered your request for a second home with "investement/non owner occupied," property."

Hope that helps.

@Tony Nguyen

@Albert Bui this is great information. I felt it would be an issue but wanted to bounce the idea around just confirm. I really appreciate the response. I guess i will continue to save my pennies so i can get that 25% down.

Thanks 

Originally posted by @Jef A. :

@Albert Bui this is great information. I felt it would be an issue but wanted to bounce the idea around just confirm. I really appreciate the response. I guess i will continue to save my pennies so i can get that 25% down.

Thanks 

 why 25% down? are you buying more than 1 unit or is the property not in an area that would be considered a second home by loan guideline definition?

If its a 1 unit property, the area can be reasonable to consider as a vacation area, and the loan you're seeking is 424,100 or under you can put as low as 10% down for this second home.

@Albert Bui I am working through quicken loans and i have also contacted wellsfargo. With both i believe i believe i can do 20% but neither company has an option for less than 20%. The properties i have found are in good areas and are single family homes. Sounds like i need to do more research to find the 10% down option.

I'm curious too. The home I live in now, we want to keep and rent out. When I get to Florida I wanted to get a 4 unit and house hack.   Will that be a problem? 

Originally posted by @Patti Rosepiler :

I'm curious too. The home I live in now, we want to keep and rent out. When I get to Florida I wanted to get a 4 unit and house hack.   Will that be a problem? 

Will that be a problem ? In what context ?

4 units are going to be considered either as an investment property or primary residence if you live there. In most cases you'll need 25% down payment to purchase however you can also use fha to buy with 3.5% down and with the new home possible program you can get conventional primary residence with 5% down.

That is what I had planned (FHA or Conv) just wasn't sure how they will look at the one I'm in now. I will barely break even renting it when I move, but would like to hold it long term because of unbelievable location on the water and growth here. I have never owned 2 homes before. Sorry for dumb questions. I will def be reading day and night to be prepared for goals.

Originally posted by @Jef A. :

@Albert Bui I am working through quicken loans and i have also contacted wellsfargo. With both i believe i believe i can do 20% but neither company has an option for less than 20%. The properties i have found are in good areas and are single family homes. Sounds like i need to do more research to find the 10% down option.

Yeah if your price range is in the lower 400's or lower you should be able to put as low as 10% down. The other reason why you might not is if you had more than 4 financed properties the min down goes from 10% to 20% with fannie mae. 

Originally posted by @Patti Rosepiler :

That is what I had planned (FHA or Conv) just wasn't sure how they will look at the one I'm in now. I will barely break even renting it when I move, but would like to hold it long term because of unbelievable location on the water and growth here. I have never owned 2 homes before. Sorry for dumb questions. I will def be reading day and night to be prepared for goals.

 Since you already have a property you wont be able to use the conventional home possible program which allows down payment as low as 5% for 2-4 unit primary residences.

You'll most likely have to use FHA 3.5% down payment financing which means you'll have specific rules you'll have to follow:

- you'll need a fourplex where the gross rents assuming all 4 units added up to equal about .90% of the sales price, meaning a 400,000 sales price fourplex generates about $3,600 per month in gross rents (4 units X 900 per unit) in order for the fourplex to meet FHA's self sufficiency rules (general rule of thumb)

- you'll need 3 months reserves for the entire monthly payment (in addition to 3.5% down payment + closing costs)

- you may want to "move out," of your current primary and rent first rather than moving from your current primary to buy this new fourplex since the "scenario," may not be too plausible to a loan underwriter if your going from a single family home to move into a fourplex. The other issue you can avoid by renting first is you dont have to adhere to the rules regarding "vacating a primary residence." Mid 2016 FHA instituted rules around vacating a primary residence which made it harder to use FHA financing when a borrower was vacating a primary ( Leaving a current home that was a primary) to purchase using a new FHA loan. This rule made it difficult because the borrower is not allowed to use rental income to offset his/her current mortgage (the property you're leaving) to qualify for a new home with FHA financing by placing a min 100 mile restriction on the new FHA financed property. Keep note that this only applies when you're trying to use rental income to offset your current loan, if you're not, and you can qualify for both homes with your other income then this 100 mile requirement is a moot point. The benefit of moving out first is that you're no longer considered under the "vacating a primary," definition because you're now "renting," and can use rental income offset and purchase a new property with FHA with out 100 mile restrictions.

This new guideline reduces chances for borrowers to use FHA to acquire more quasi primary/investment properties since the original intent for FHA was home ownership not investment property promotion.

Wow Albert!  Reasons like this are exactly why I love BP!   Thank you!  I will be leaving this home here in NC to move to Florida. Rent the NC one and I'll try and house hack a 4 flex in Florida.  It's great to know these tips ahead of time. I will rent for just a short bit while I look around for the right property. I appreciate your expert advice. That is the side of this I am going to try and educate myself on before I move. 

Originally posted by @Patti Rosepiler :

Wow Albert!  Reasons like this are exactly why I love BP!   Thank you!  I will be leaving this home here in NC to move to Florida. Rent the NC one and I'll try and house hack a 4 flex in Florida.  It's great to know these tips ahead of time. I will rent for just a short bit while I look around for the right property. I appreciate your expert advice. That is the side of this I am going to try and educate myself on before I move. 

Welcome Patti,

Even though its conventional and FHA financing which many people think is really rigid, there are still ways to craft these programs to meet your objectives and the program's guidelines as well. Like Tax or RE law, you can change the facts/context to change the consideration or interpretation of the guidelines.

The key is vacating your NC first, go rent (maybe 6 months lease + m2m after), then shop and buy after that 6 month mark once you have 6 months of rents received on NC.

This would make it a very solid scenario for an underwrite to approve if you need to use rental income offset on your NC property.

@Patti Rosepiler buying in another state can qualify the home as a second home and not an investment property.  It may be even considered your primary home if you have immediate plans on moving there.  

I could do either. Buy as soon as I move there or wait and rent. Whichever turns out more beneficial. I have family there I can stay with if need be too. I'm open.   

Originally posted by @Remus Phillips :

@Patti Rosepiler buying in another state can qualify the home as a second home and not an investment property.  It may be even considered your primary home if you have immediate plans on moving there.  

Buying as a second home in the 1 unit/SFR/Condo/PUD/Townhome property sure.

On the lending end 2-4 unit properties arent allowed as "second homes." Second homes have rates that are similar to a primary residence except down payment requirements are a bit higher (min 10% down instead of 3-5 down on primary residences. 

It looks like she plans to buy a fourplex so it will have to be considered either a primary residence (house hack) or an investment property.

Originally posted by @Albert Bui :
Originally posted by @Patti Rosepiler:

That is what I had planned (FHA or Conv) just wasn't sure how they will look at the one I'm in now. I will barely break even renting it when I move, but would like to hold it long term because of unbelievable location on the water and growth here. I have never owned 2 homes before. Sorry for dumb questions. I will def be reading day and night to be prepared for goals.

 Since you already have a property you wont be able to use the conventional home possible program which allows down payment as low as 5% for 2-4 unit primary residences.

You'll most likely have to use FHA 3.5% down payment financing which means you'll have specific rules you'll have to follow:

- you'll need a fourplex where the gross rents assuming all 4 units added up to equal about .90% of the sales price, meaning a 400,000 sales price fourplex generates about $3,600 per month in gross rents (4 units X 900 per unit) in order for the fourplex to meet FHA's self sufficiency rules (general rule of thumb)

- you'll need 3 months reserves for the entire monthly payment (in addition to 3.5% down payment + closing costs)

- you may want to "move out," of your current primary and rent first rather than moving from your current primary to buy this new fourplex since the "scenario," may not be too plausible to a loan underwriter if your going from a single family home to move into a fourplex. The other issue you can avoid by renting first is you dont have to adhere to the rules regarding "vacating a primary residence." Mid 2016 FHA instituted rules around vacating a primary residence which made it harder to use FHA financing when a borrower was vacating a primary ( Leaving a current home that was a primary) to purchase using a new FHA loan. This rule made it difficult because the borrower is not allowed to use rental income to offset his/her current mortgage (the property you're leaving) to qualify for a new home with FHA financing by placing a min 100 mile restriction on the new FHA financed property. Keep note that this only applies when you're trying to use rental income to offset your current loan, if you're not, and you can qualify for both homes with your other income then this 100 mile requirement is a moot point. The benefit of moving out first is that you're no longer considered under the "vacating a primary," definition because you're now "renting," and can use rental income offset and purchase a new property with FHA with out 100 mile restrictions.

This new guideline reduces chances for borrowers to use FHA to acquire more quasi primary/investment properties since the original intent for FHA was home ownership not investment property promotion.

Albert,

Does this "move out" loop apply if my first and only property is a 2br condo with a conventional loan. I'm planning on renting out the spare bedroom, but it takes 2yrs of rental income on my taxes for it to improve my DTI for the next loan?

If I wanted to buy a second owner occupied property with FHA, how long do I have to wait under the current restrictions?

Originally posted by @Bo S. :
Originally posted by @Albert Bui:
Originally posted by @Patti Rosepiler:

That is what I had planned (FHA or Conv) just wasn't sure how they will look at the one I'm in now. I will barely break even renting it when I move, but would like to hold it long term because of unbelievable location on the water and growth here. I have never owned 2 homes before. Sorry for dumb questions. I will def be reading day and night to be prepared for goals.

 Since you already have a property you wont be able to use the conventional home possible program which allows down payment as low as 5% for 2-4 unit primary residences.

You'll most likely have to use FHA 3.5% down payment financing which means you'll have specific rules you'll have to follow:

- you'll need a fourplex where the gross rents assuming all 4 units added up to equal about .90% of the sales price, meaning a 400,000 sales price fourplex generates about $3,600 per month in gross rents (4 units X 900 per unit) in order for the fourplex to meet FHA's self sufficiency rules (general rule of thumb)

- you'll need 3 months reserves for the entire monthly payment (in addition to 3.5% down payment + closing costs)

- you may want to "move out," of your current primary and rent first rather than moving from your current primary to buy this new fourplex since the "scenario," may not be too plausible to a loan underwriter if your going from a single family home to move into a fourplex. The other issue you can avoid by renting first is you dont have to adhere to the rules regarding "vacating a primary residence." Mid 2016 FHA instituted rules around vacating a primary residence which made it harder to use FHA financing when a borrower was vacating a primary ( Leaving a current home that was a primary) to purchase using a new FHA loan. This rule made it difficult because the borrower is not allowed to use rental income to offset his/her current mortgage (the property you're leaving) to qualify for a new home with FHA financing by placing a min 100 mile restriction on the new FHA financed property. Keep note that this only applies when you're trying to use rental income to offset your current loan, if you're not, and you can qualify for both homes with your other income then this 100 mile requirement is a moot point. The benefit of moving out first is that you're no longer considered under the "vacating a primary," definition because you're now "renting," and can use rental income offset and purchase a new property with FHA with out 100 mile restrictions.

This new guideline reduces chances for borrowers to use FHA to acquire more quasi primary/investment properties since the original intent for FHA was home ownership not investment property promotion.

Albert,

Does this "move out" loop apply if my first and only property is a 2br condo with a conventional loan. I'm planning on renting out the spare bedroom, but it takes 2yrs of rental income on my taxes for it to improve my DTI for the next loan?

If I wanted to buy a second owner occupied property with FHA, how long do I have to wait under the current restrictions?

It does not take "2 years of rental income," on your tax returns to use that income in all instances only what you've heard. Many sources are available to use use gross rent x 75% - PITIA even if you don't have an actual tenant(S) but the projected rental calculation is important to note that it works only for purchases.  On refinances you need actual tenants to use rental income and or tax returns.

Your wait is generally about 12 months but could be sooner in extenuating circumstance that merit it. Go with the rule of thumb if you don't want to push the edge but if you have a relocation letter, change orders from your CO, need to urgently move to take care of your mother I'm sure a primary residence scenario could be less than 12 months as well. 

It's important to differentiate from grey areas and rule of thumbs. Not everything in lending is cut and dry as much as it may seem so.

Originally posted by @Albert Bui :
Originally posted by @Bo S.:
Originally posted by @Albert Bui:
Originally posted by @Patti Rosepiler:

That is what I had planned (FHA or Conv) just wasn't sure how they will look at the one I'm in now. I will barely break even renting it when I move, but would like to hold it long term because of unbelievable location on the water and growth here. I have never owned 2 homes before. Sorry for dumb questions. I will def be reading day and night to be prepared for goals.

 Since you already have a property you wont be able to use the conventional home possible program which allows down payment as low as 5% for 2-4 unit primary residences.

You'll most likely have to use FHA 3.5% down payment financing which means you'll have specific rules you'll have to follow:

- you'll need a fourplex where the gross rents assuming all 4 units added up to equal about .90% of the sales price, meaning a 400,000 sales price fourplex generates about $3,600 per month in gross rents (4 units X 900 per unit) in order for the fourplex to meet FHA's self sufficiency rules (general rule of thumb)

- you'll need 3 months reserves for the entire monthly payment (in addition to 3.5% down payment + closing costs)

- you may want to "move out," of your current primary and rent first rather than moving from your current primary to buy this new fourplex since the "scenario," may not be too plausible to a loan underwriter if your going from a single family home to move into a fourplex. The other issue you can avoid by renting first is you dont have to adhere to the rules regarding "vacating a primary residence." Mid 2016 FHA instituted rules around vacating a primary residence which made it harder to use FHA financing when a borrower was vacating a primary ( Leaving a current home that was a primary) to purchase using a new FHA loan. This rule made it difficult because the borrower is not allowed to use rental income to offset his/her current mortgage (the property you're leaving) to qualify for a new home with FHA financing by placing a min 100 mile restriction on the new FHA financed property. Keep note that this only applies when you're trying to use rental income to offset your current loan, if you're not, and you can qualify for both homes with your other income then this 100 mile requirement is a moot point. The benefit of moving out first is that you're no longer considered under the "vacating a primary," definition because you're now "renting," and can use rental income offset and purchase a new property with FHA with out 100 mile restrictions.

This new guideline reduces chances for borrowers to use FHA to acquire more quasi primary/investment properties since the original intent for FHA was home ownership not investment property promotion.

Albert,

Does this "move out" loop apply if my first and only property is a 2br condo with a conventional loan. I'm planning on renting out the spare bedroom, but it takes 2yrs of rental income on my taxes for it to improve my DTI for the next loan?

If I wanted to buy a second owner occupied property with FHA, how long do I have to wait under the current restrictions?

It does not take "2 years of rental income," on your tax returns to use that income in all instances only what you've heard. Many sources are available to use use gross rent x 75% - PITIA even if you don't have an actual tenant(S) but the projected rental calculation is important to note that it works only for purchases.  On refinances you need actual tenants to use rental income and or tax returns.

Your wait is generally about 12 months but could be sooner in extenuating circumstance that merit it. Go with the rule of thumb if you don't want to push the edge but if you have a relocation letter, change orders from your CO, need to urgently move to take care of your mother I'm sure a primary residence scenario could be less than 12 months as well. 

It's important to differentiate from grey areas and rule of thumbs. Not everything in lending is cut and dry as much as it may seem so.

So after 12months of living in my condo and renting out the extra bd, some lenders will use 75% of the potential rental income for the entire condo for my DTI? Or just rental income on the spare bd?

For ex. If my current mortgage is 2300 and the spare bd rents for $1250. Would it be .75x $1250= $938 is subtracted from my total monthly DTI?

After 12months, are there any other restrictions keeping me from getting an owner occupied duplex with FHA?

Thanks 

The rental income is on the entire unit only, you cannot use room mate income which we call "boarder," income unless you're applying for the fannie mae home ready primary residence mortgage program or various other niche programs. In general, most programs will not allow use of boarder income.

Regarding after 12 months can you apply for FHA, it depends if you're living else where then buying with FHA or if you're vacating your current primary home and then plan to rent it out to offset your house payment so you can qualify for your new home, the former is the best way to avoid departing residence rules from FHA, and the later is how you subject your self to the FHA 100 mile rule which basically means you cannot use rental income to qualify for a new home with FHA unless you're relocating or living in BFE (applies to people who need that rental income offset to qualify).

The departing residence rules are a set of guidelines that require you to meet certain criteria prior to being able to offset your vacating primary residence with rental income for the purposes of qualifying for another home when using FHA financing. So if you rent your house out and move in with a room mate/apartment/move out for 6-12 months and "THEN," apply for FHA you're no longer considered a borrower who is departing your primary residence any longer. So what does this mean? It means you can use rental income to offset your previous home "and," you get to qualify for FHA financing while not having to meet the departing residence rules....Boom.

so in essence that is a work around. Does it take time to plan this? sure so plan your home loan accordingly with someone who knows the rules because doing so could jump start your real estate investing journey.

Originally posted by @Albert Bui :

The rental income is on the entire unit only, you cannot use room mate income which we call "boarder," income unless you're applying for the fannie mae home ready primary residence mortgage program or various other niche programs. In general, most programs will not allow use of boarder income.

Regarding after 12 months can you apply for FHA, it depends if you're living else where then buying with FHA or if you're vacating your current primary home and then plan to rent it out to offset your house payment so you can qualify for your new home, the former is the best way to avoid departing residence rules from FHA, and the later is how you subject your self to the FHA 100 mile rule which basically means you cannot use rental income to qualify for a new home with FHA unless you're relocating or living in BFE (applies to people who need that rental income offset to qualify).

The departing residence rules are a set of guidelines that require you to meet certain criteria prior to being able to offset your vacating primary residence with rental income for the purposes of qualifying for another home when using FHA financing. So if you rent your house out and move in with a room mate/apartment/move out for 6-12 months and "THEN," apply for FHA you're no longer considered a borrower who is departing your primary residence any longer. So what does this mean? It means you can use rental income to offset your previous home "and," you get to qualify for FHA financing while not having to meet the departing residence rules....Boom.

so in essence that is a work around. Does it take time to plan this? sure so plan your home loan accordingly with someone who knows the rules because doing so could jump start your real estate investing journey.

So let me get this straight,

-I wouldn't be able to use "boarder" income from a roommate for DTI qualifications purposes, if I wanted to get an FHA loan for a 1-4unit?

-I would have to move out after a year and rent elsewhere for 6-12mos to avoid the FHA 100mile departing residence rule. In order to use rental income, for the entire unit, to help me qualify for an FHA mortgage.

-Is there a minimum amount of equity I need in my first home, to qualify for the FHA on a second home?

-With my current loan being a conventional, with 5% down, are there any other ways I can put myself in the best situation, to purchase a 1-4unit in a year?

Thanks

Originally posted by @Bo S. :
Originally posted by @Albert Bui:

The rental income is on the entire unit only, you cannot use room mate income which we call "boarder," income unless you're applying for the fannie mae home ready primary residence mortgage program or various other niche programs. In general, most programs will not allow use of boarder income.

Regarding after 12 months can you apply for FHA, it depends if you're living else where then buying with FHA or if you're vacating your current primary home and then plan to rent it out to offset your house payment so you can qualify for your new home, the former is the best way to avoid departing residence rules from FHA, and the later is how you subject your self to the FHA 100 mile rule which basically means you cannot use rental income to qualify for a new home with FHA unless you're relocating or living in BFE (applies to people who need that rental income offset to qualify).

The departing residence rules are a set of guidelines that require you to meet certain criteria prior to being able to offset your vacating primary residence with rental income for the purposes of qualifying for another home when using FHA financing. So if you rent your house out and move in with a room mate/apartment/move out for 6-12 months and "THEN," apply for FHA you're no longer considered a borrower who is departing your primary residence any longer. So what does this mean? It means you can use rental income to offset your previous home "and," you get to qualify for FHA financing while not having to meet the departing residence rules....Boom.

so in essence that is a work around. Does it take time to plan this? sure so plan your home loan accordingly with someone who knows the rules because doing so could jump start your real estate investing journey.

So let me get this straight,

-I wouldn't be able to use "boarder" income from a roommate for DTI qualifications purposes, if I wanted to get an FHA loan for a 1-4unit?

-I would have to move out after a year and rent elsewhere for 6-12mos to avoid the FHA 100mile departing residence rule. In order to use rental income, for the entire unit, to help me qualify for an FHA mortgage.

-Is there a minimum amount of equity I need in my first home, to qualify for the FHA on a second home?

-With my current loan being a conventional, with 5% down, are there any other ways I can put myself in the best situation, to purchase a 1-4unit in a year?

Thanks

1) correct unless if that roommate was your caretaker and you were disabled

2) you don't have to move out, it's just a Strategy you can implement  that Allows you to avoid departing residence classification 

3) no equity required to use rental income to qualify upon vacating your current primary unless if your departing a fha financed house for a second fha loan (apply for a second fha under one of the four exceptions allowed by fha) then you need to buy 100+ miles under departing residence rules AND you need 25% equity to get that second fha loan. But your current residence is conventional anyway so this irrelevant but none the less here to help someone else looking for a 2nd fha loan. The key here as complex as it seems is it determine.... If you need to use rental income offset to qualify or not ? Then is your current home loan a fha loan or not?  If the answer is no to both of those then none of this 3rd bullet point matters.

4) yes sell your current house and use 5% down with no monthly MI home possible freddie max conventional to buy a fourplex and house hack it 

Originally posted by @Albert Bui :
Originally posted by @Bo S.:
Originally posted by @Albert Bui:

The rental income is on the entire unit only, you cannot use room mate income which we call "boarder," income unless you're applying for the fannie mae home ready primary residence mortgage program or various other niche programs. In general, most programs will not allow use of boarder income.

Regarding after 12 months can you apply for FHA, it depends if you're living else where then buying with FHA or if you're vacating your current primary home and then plan to rent it out to offset your house payment so you can qualify for your new home, the former is the best way to avoid departing residence rules from FHA, and the later is how you subject your self to the FHA 100 mile rule which basically means you cannot use rental income to qualify for a new home with FHA unless you're relocating or living in BFE (applies to people who need that rental income offset to qualify).

The departing residence rules are a set of guidelines that require you to meet certain criteria prior to being able to offset your vacating primary residence with rental income for the purposes of qualifying for another home when using FHA financing. So if you rent your house out and move in with a room mate/apartment/move out for 6-12 months and "THEN," apply for FHA you're no longer considered a borrower who is departing your primary residence any longer. So what does this mean? It means you can use rental income to offset your previous home "and," you get to qualify for FHA financing while not having to meet the departing residence rules....Boom.

so in essence that is a work around. Does it take time to plan this? sure so plan your home loan accordingly with someone who knows the rules because doing so could jump start your real estate investing journey.

So let me get this straight,

-I wouldn't be able to use "boarder" income from a roommate for DTI qualifications purposes, if I wanted to get an FHA loan for a 1-4unit?

-I would have to move out after a year and rent elsewhere for 6-12mos to avoid the FHA 100mile departing residence rule. In order to use rental income, for the entire unit, to help me qualify for an FHA mortgage.

-Is there a minimum amount of equity I need in my first home, to qualify for the FHA on a second home?

-With my current loan being a conventional, with 5% down, are there any other ways I can put myself in the best situation, to purchase a 1-4unit in a year?

Thanks

1) correct unless if that roommate was your caretaker and you were disabled

2) you don't have to move out, it's just a Strategy you can implement  that Allows you to avoid departing residence classification 

3) no equity required to use rental income to qualify upon vacating your current primary unless if your departing a fha financed house for a second fha loan (apply for a second fha under one of the four exceptions allowed by fha) then you need to buy 100+ miles under departing residence rules AND you need 25% equity to get that second fha loan. But your current residence is conventional anyway so this irrelevant but none the less here to help someone else looking for a 2nd fha loan. The key here as complex as it seems is it determine.... If you need to use rental income offset to qualify or not ? Then is your current home loan a fha loan or not?  If the answer is no to both of those then none of this 3rd bullet point matters.

4) yes sell your current house and use 5% down with no monthly MI home possible freddie max conventional to buy a fourplex and house hack it 

Unfortunately I would need the rental income offset to qualify for the 2nd property. The rental income pays half of my total mortgage and without it, my DTI will be over 40%.

I'm somewhat in a bind. I can't sell bc I'm closing on Monday on the first property, with a conventional 20yr fixed at 3.875. I assume not closing will likely forfeit my earnest money. 

From what Ive read, best case scenario is to claim boarder income on my 2017 taxes and find a lender that will use it for my DTI.

What does it take to qualify for an owner occupied FHA or the HomeReady program for the 2nd property?

Thoughts?

Thanks

FHA for 2nd is possible yes and home ready no because you cannot own any other real estate (home ready is not first time buyer but cannot own other property).

As for use of rental income offset, perhaps you didnt understand the above planning but you "can," use it and avoid FHA's rules if you do the above.

As for your current purchase if you've released all of your contingencies you could risk losing your EMD or initial deposit or earnest money deposit.

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here