Financing in San Diego>Question Details

lost and con…, Both Buyer and Seller in San Diego, CA

Is it feasible to obtain a 2nd mortgage to buy a second home (as my future primary residency) with the intent to rent out my current condo?

Asked by lost and confused, San Diego, CA Thu May 24, 2012

I originally wanted to sell my condo (which is underwater) via the traditional route but was unable to entertain the offers received. Now I am thinking of either short selling my condo, or renting it out and trying to buy into a more stable condo/HOA complex until the real estate market improves. I'd prefer my finances be immediately disconnected from the "weaker links" of other homeowners in our condo complex but renting out my condo would not hurt my credit score as in a short sale. However, I am unsure if it's even possible to qualify for a 2nd mortgage to buy a 2nd condo while I haven't rented out my current one yet (I'm still living in it). I have over 50K in savings, am able to afford my current mortgage/HOA monthly dues/insurance/unexpected monthly expenses that may pop up. My credit score is in the upper 700s. I am desperate for answers but the only person who seems willing to help me is the agent that wants to short sell my condo.

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18
Gregorio Denny’s answer
Lost and Confused,

Here's the actual answer to your question. If you can afford both principal, interest, tax and insurance, and your debt ratio qualifies you as such, you can buy whatever you like. If however you need the rental income of the condo to afford the new home, you will not be able to purchase. Conventional financing requires that you have 30% equity in the property you are converting to a rental in order to use that income and FHA requires 25% equity. This is to prevent people from buying a new property and bailing on the old one. There is no way around this rule.
Web Reference: http://WeFixRates.Com
1 vote Thank Flag Link Fri May 25, 2012
Excellent direct & true response! I worked in loans before real estate & there is no way around this rule. Numbers are the numbers these days no matter what anyone else tells you. Still I recommend that you find a very experienced mortgage broker to work with & run your numbers so you can prepare for future purchases & know exactly where you stand financially. Good luck!
Flag Sun May 27, 2012
Second mortgage is an ideal solution only if you really need it. However, I still believe that before applying for a personal loan such as 2nd mortgage, you should be able to assess yourself if you have the resources to pay-off your debt.If yes, then find a lender that offers low interest and decent terms. Then pay your loan on time and do not extend your term of payment.

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1 vote Thank Flag Link Fri Oct 4, 2013
You can obtain a second mortgage on an investment property by placing your current property in a living trust. You can find the answers to your questions about trusts by either calling your attorney or check out findlaw.com. To set a trust up check out legalzoom.com.
0 votes Thank Flag Link Wed May 7, 2014
First of all, there are new FHA guidelines that allow you to short sale out of your current home and repurchase another property if you are not delinquent on your current mortgage and have decent credit and you are either relocating or needing to downsize for financial reasons (or upsize if you have new children). This is looked at by a lender on a case by case basis, but it is not that difficult to ascertain with a consultation.
Secondly, there are certain lenders that will allow showing your current house as a rental with a lease agreement (for example) effective next month and then claiming that as your rental house and then using that rental income to help you qualify for a new purchase of a home to owner occupy. Most lenders require a minimum 6 months history of rental income but a direct lender and portfolio lender can have their underwriting make their own determination. If your debt to income ratio is good enough, you can keep your current home as a second home and then buy another house as a primary residence if there is approximately 45 minute drive difference (Ideally in a separate county). Alternatively, purchase your next home as a second home, making both of your properties as primary residences. I am not a loan officer (I am realtor) so I would need to refer you to the lenders that I am aware of that might accommodate you best.
I have recently accomplished all the above and although these are not traditional, I am able to get the job done in most cases. Call me David Dukes 619-788-7388 daviddukes@hotmail.com
0 votes Thank Flag Link Sun May 27, 2012
You CAN buy a property with the intent of occupying it as your SECOND home in the future. We are one of few lenders that allow that. However, you will be hit with the payment of current residence and the future (second) home. You can't use the rental income without a two-year history as a landlord.

I hope this helps!

jdeblanco@kinecta.org
0 votes Thank Flag Link Fri May 25, 2012
Hi Lost & Confused,
I am sorry that you are being pushed towards one option by an overzealous agent. You best bet is to talk to an agent that can speak to all your options in conjuncation with a mortgage broker that can vett each option out. If you need direct assistance, feel free to contact me. I have clients in your same situation, so hopefully we can find a clearer path for you!

Thanks!
Sinead McAllister
Broker
McAllister Homes Real Estate & Property Management
858-205-5215
brokermcallister@gmail.com
0 votes Thank Flag Link Fri May 25, 2012
It sounds like you absolutely must speak to an experienced mortgage broker. Realtors are not experts when it comes to financing. If you want to call me directly, I can refer you to a couple of reputable people.
0 votes Thank Flag Link Fri May 25, 2012
Like Jerry said, lenders would need you to qualify for both properties if you plan on keeping the condo.

One option if you don't think you could qualify, is to move into a rental yourself for a year, and get a tenant for your condo. Then your lender could use 12 months of documented rental payments (lease, receipts, etc.) as income to help you qualify for your next purchase. Once you're in your new home, you can decide weather to sell or keep renting out the condo. There's more than one way to skin a cat!

Warm Regards,

Cory La Scala, REALTOR
Independence Realty
619-825-6421
0 votes Thank Flag Link Fri May 25, 2012
I can understand why you are lost and confused! I would reccommend teaming up with an agent and lender who are extremely well versed in our current market, who can lay out ALL OF YOUR OPTIONS, so that you can make an informed decision and feel good about it. There are some monumental changes that will begin June 1, 2012 that will give homeowners in your situation, the opportunity to get from under your current home and turn around and buy another...If you qualify. Let's find out! Very exciting changes!

Chris Gorno
0 votes Thank Flag Link Fri May 25, 2012
I recently helped a couple buy another home even though they currently owned a home that was underwater. They are planning on renting out their other home. It all comes down to debt ratios that the lender will analyze to determine if you will qualify.
If you would like, I can put you in contact with the lender that we worked with on the transaction that I mentioned to see if you can qualify for the new purchase.

I am never too busy for your referrals

Jerry Heard
Your Broker
The San Diego Property Shop
http://www.TheSanDiegoPropertyShop.com
jerry.sdps@cox.net
Direct 619-920-9796
Office 619-269-5545
Fax 619-269-9168
CA DRE # 00648687
0 votes Thank Flag Link Fri May 25, 2012
It is difficult, but not out of the question. You have to qualify for both mortgages without counting the rental income. You can't include the rental income on a property that does not have equity, and specially if you don't have a history (tax returns) of being a landlord.

I would love to help you and set you up with my preferred lender, and make a plan for you. Best of luck.

Hector R. Gastelum
Realty Executives Dillon
REALTOR #01382940
2240 Otay Lakes Rd. #306
Chula Vista, Ca 91913
hectorgastelum@yahoo.com
619-954-2225
125*142*10754
efax 619-270-2516
0 votes Thank Flag Link Fri May 25, 2012
Yes, you can rent out your condo and buy another IF YOU QUALIFY FOR A SECOND LOAN. You have to speak to a very good lender. I can recommend a few. Just contact me and I can help you.
0 votes Thank Flag Link Thu May 24, 2012
Hello:

This will take a great deal of planning. In order to effectively look at the situation, one would have to know your income and ratios. However, assuming that the cash flow is positive enough, you would probably be able to rent out the property and buy another condo. Lenders vary on how they will treat the rental income. Some lenders will not allow the rental income without 5 months of rental track record.

If you are serious on trying to do this you can contact me through my website http://www.WolfRealEstateGroup.com. I am a real estate broker, former CPA who has extensive loan experience.

Thank you and good luck


Robert Wolf
0 votes Thank Flag Link Thu May 24, 2012
Hello:

This will take a great deal of planning. In order to effectively look at the situation, one would have to know your income and ratios. However, assuming that the cash flow is positive enough, you would probably be able to rent out the property and buy another condo. Lenders vary on how they will treat the rental income. Some lenders will not allow the rental income without 5 months of rental track record.

If you are serious on trying to do this you can contact me through my website http://www.WolfRealEstateGroup.com. I am a real estate broker, former CPA who has extensive loan experience.

Thank you and good luck


Robert Wolf
0 votes Thank Flag Link Thu May 24, 2012
Hello:

This will take a great deal of planning. In order to effectively look at the situation, one would have to know your income and ratios. However, assuming that the cash flow is positive enough, you would probably be able to rent out the property and buy another condo. Lenders vary on how they will treat the rental income. Some lenders will not allow the rental income without 5 months of rental track record.

If you are serious on trying to do this you can contact me through my website http://www.WolfRealEstateGroup.com. I am a real estate broker, former CPA who has extensive loan experience.

Thank you and good luck


Robert Wolf
0 votes Thank Flag Link Thu May 24, 2012
Hello:

This will take a great deal of planning. In order to effectively look at the situation, one would have to know your income and ratios. However, assuming that the cash flow is positive enough, you would probably be able to rent out the property and buy another condo. Lenders vary on how they will treat the rental income. Some lenders will not allow the rental income without 5 months of rental track record.

If you are serious on trying to do this you can contact me through my website http://www.WolfRealEstateGroup.com. I am a real estate broker, former CPA who has extensive loan experience.

Thank you and good luck


Robert Wolf
0 votes Thank Flag Link Thu May 24, 2012
Hello:

This will take a great deal of planning. In order to effectively look at the situation, one would have to know your income and ratios. However, assuming that the cash flow is positive enough, you would probably be able to rent out the property and buy another condo. Lenders vary on how they will treat the rental income. Some lenders will not allow the rental income without 5 months of rental track record.

If you are serious on trying to do this you can contact me through my website http://www.WolfRealEstateGroup.com. I am a real estate broker, former CPA who has extensive loan experience.

Thank you and good luck


Robert Wolf
0 votes Thank Flag Link Thu May 24, 2012
Hello:

This will take a great deal of planning. In order to effectively look at the situation, one would have to know your income and ratios. However, assuming that the cash flow is positive enough, you would probably be able to rent out the property and buy another condo. Lenders vary on how they will treat the rental income. Some lenders will not allow the rental income without 5 months of rental track record.

If you are serious on trying to do this you can contact me through my website http://www.WolfRealEstateGroup.com. I am a real estate broker, former CPA who has extensive loan experience.

Thank you and good luck


Robert Wolf
0 votes Thank Flag Link Thu May 24, 2012
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