As for reserves, WOW, this requirement varies widely between lenders, this was a very enlightening thread. We (my company) only require two months reserves per property outside of the new owner occupied one.
No matter what the FICO score, or the ability to pay, depending on their model, the portfolio guidelines, their ability to sell the loan into the secondary market and God knows what else, there is a level of risk they cannot tolerate and their perception of what that is often varies greatly from that of the borrower.
BTW- 2nd mortgages are considered a very high risk product, and are not a common loan in this environment for most borrowers. Welcome to 2012 in our world.
I'm a little confused by your answer. How would anyone that owns rental property ever qualify for a 2nd mortgage by your rationale then?
Why would someone extend me credit - for one, my credit score is 800, I've never missed a payment on anyone, or given any creditor any reason to believe that I use bad judgment when making financial decisions. My DTI is 45.7%, and this is NOT counting in my rental income. With 75% of that counted, my DTI would be around 40%.
I guess my question is....what does it matter how many properties you own, or what equity you have in them, as long as you are earning enough to cover them all and that fact is reflected in your DTI?
I can give you this suggestion
V.P. Marketing and Development
Quality Mortgage Lending
"We do FHA loans down to a 600 middle credit score"
"We do USDA loans down to a 620 middle credit score" (no money down)
"We do $100 down payment FHA program"
"Unlimited loan to value refinance on Fannie/Freddie refinances" (only on loans originated before May 31st 2009)
Sean's answer on using rental income is more accurate if you have been renting it out already. What you may need to do to use rental income is to file your return for 2011 and show the rental income, a copy of the lease, and possibly even the fact that you received the security deposit. The 30% equity issue is when turning a primary residence into a rental property. If you do not have the income on a tax return, Chase will accept a lease, but will want to see the amount of rent that you are claiming going into your account.
Right now I am trying to get someone approved for a refi that makes total sense, but the numbers just don't work because all these guidelines aren't being met.
If you have already vacated the property - which I would assume you have becasue you have renters, then you can use the rental income once you file your tax returns and disclose the rental amount.
However based on the information listed you should not have a problem qualifying for a loan - the debt ratios are not ideal but they are still within range
I would be happy to offer assistance or answer any further questions. Please feel free to contact me at anytime
Senior VP of Mortgage Lending
Michael Plating at Inlanta Mortgage is my miracle worker when it comes to these kinds of loans.
(630) 842-3328 firstname.lastname@example.org
Sean Lowry -Pacor Mortgage Corp. 312.786.5844
Let me know if I can help further.