Mortgage For Second Primary Residence Lending Guidelines
This Article Is About Mortgage For Second Primary Residence Lending Guidelines
Many Americans have a current primary residence and are looking to purchase another home. There can countless reasons why homebuyers are buying a second primary residence home. It can be due to needing more space due to a growing family. Many homeowners with a condo or townhome may want to move to a single family home with a yard. Many people are fleeing the city due to high crime and recent rioting to the suburbs. Many homebuyers move to be in a certain school district for their children. It can be due to downsizing after their children leave for college or move out of the family home. As of what they will do with the first home, it is up to the homeowner. Most people decide to sell their home and use the proceeds for the down payment on their second primary home purchase. Others want to keep it as a rental property. Regardless, buying a second primary owner-occupant home purchase and having the first home is more common than many think.
FAQ On Buying Second Primary Owner-Occupant Home
Gustan Cho Associates get countless calls daily about homebuyers needing to qualify for a second primary owner-occupant home and deciding on what to do with their first home. Primary owner-occupant home mortgage loans are the home loan of choice. This is because primary owner-occupant home loans have the lowest down payment requirements and lowest mortgage rates out of any other loan programs.
Below is a list of common FAQ on buying a second primary owner-occupant home by homebuyers:
- A few questions will come up such as am I going to sell my current house?
- Or am I going to rent it out?
- What if my first house does not sell?
- Can I qualify for two mortgages at the same time?
- What are the agency mortgage guidelines in having two primary owner-occupant homes at the same time?
- A lot of those decisions depend on if home buyers need the funds from their sale to buy their next home
In this article, we will discuss and cover Mortgage For Second Primary Residence Lending Guidelines. Buying a second primary residence without selling the first house is more common than you think. Gustan Cho Associates are experts in helping homebuyers purchase a second primary owner-occupant home and selling their first home. Sometimes the second primary homebuyer may sell the first home. Other times the second home does not sell prior to closing on the second primary home.
How Lenders View Mortgage For Second Primary Residence
Primary owner occupant home loans are the mortgage of choice. This is because owner occupant primary mortgage loans require the lowest down payment. Primary residence loans also have the lowest mortgage rates. Lenders consider primary owner occupant homes the less riskiest investments. This is because if a financial crisis happens in a household, most people do not bail on their home loans. Homeowners will more likely default on their investment properties before they will be bailing on their primary residence homes if they go through a financial crisis.
Qualifying For Mortgage For Second Primary Residence Homes
How much equity do you have in your current home, of if there is not equity, can you afford two mortgages? Buying next home can be incredibly confusing but it does not have to be. Buyers need to deal with a loan officer who is up-to-date on current guidelines. At Gustan Cho Associates, we hold our loan officers to a very high standard. They should be up to all mortgage guidelines. If for any reason the loan officer does not know an answer, we have access to underwriters who will know the answer. So, you have decided you want to buy a new primary residence.
Steps In Getting Started In Qualifying For Mortgage For Second Primary Residence Home Purchase
What Are Next Steps In Qualifying For Mortgage For Second Primary Residence Home Purchases. Homeowners will want to speak with family and determine if they will be selling their current home or renting it out. There are certain requirements to rent it out before the income can be counted in borrowers debt to income ratio. We will go over this later in the blog.
Homeowners planning on selling exiting the current primary home and using those funds for the down payment on next home, that process is very simple. In fact, home buyers can start the mortgage pre-approval process for next home today. They do not need to wait for their home to sell. We will simply input proceeds from the sale of the home as their down payment in our system. Home buyers can sign a contract to purchase a new home contingent on the sale of their current home. This process is very simple. It only gets complicated when IF buyers of their current home run into mortgage issues.
Renting Exiting Home When Qualifying For Mortgage For Second Primary Residence
What are the options if homeowners want to rent a house out?
There have a few options.
The easiest way:
- if you make enough money where the debt to income ratio can absorb both mortgage payments this home is really a non-issue
- An underwriter can justify their ability to repay both loans
- They will be able to proceed with the purchase of the next primary residence
- Fannie Mae has very specific documentation required for this situation when rental income is not being used from exiting property
- May order an appraisal report with comparable run schedules (form 1007)
- Must be dated within the past 12 months
- If the house is not currently rented the lender may use the opinion of Market rents as stated by the appraiser
If an appraisal is not required, the lender may rely on a signed lease agreement for the exiting property showing the rent being charged monthly.
Using Rental Income From Exiting Home
If you need to use the rental income from the exiting property, the documentation is slightly different:
- Borrowers MUST have an appraisal completed along with comparable rent schedule (form 1007) to document the income allowed on this property
- In order for this income to be counted borrowers must have lived in the subject property for at least 12 months or have 25% equity in the exiting property
At that point, you can use 75% of the fair market rent added back into the overall debt to income ratio.
Documents Required To Start Mortgage Process
What is needed to start the process?
First, you will need to gather some up-front documentation:
- Last 60 Days Bank Statements – to source down payment
- Last 30 Days Pay Stubs
- Last Two Years W2’S
- Last Two Years Tax Returns
- Current Mortgage Statement
- Homeowners Insurance Information
- Driver’s License
Contact a specialist directly on 630-659-7644 or text for faster response. Or email us at [email protected] Mike Gracz is available 7 days a week. He will go over the mortgage process and send you an application link to get started.
What Determines Mortgage Qualification?
Borrowers can see from reading above this is a very confusing topic. It is our job to provide you with the information necessary to make an educated decision on what to do with your current primary residence. Depending on your equity position and the amount of rent you may be able to get, this can be a great way to become a real estate investor. There are many areas in our country where you can make a pretty penny renting out your property. Hopefully, you are in one of these areas. we are experts in many areas of the mortgage industry, please contact us to get you into your next primary residence.