Home Buying in San Francisco>Question Details

Ken, Home Buyer in Los Angeles, CA

Question with 2nd home mortgage to be primary home? How hard is it to get the 2nd home lender approved?

Asked by Ken, Los Angeles, CA Tue Feb 14, 2012

I bought a home in Los Angeles about 2 years ago, and now I got relocated to San Francisco, and am looking for a home to buy. As my SF home is going to be my primary home, is it possible that I can get primary home rate for the new 2nd home since I work and live in SF? I might rent out the house in LA to cover the LA home mortgage.

With the second home mortgage, how hard is it to get lender approve? I have over 20% downpayment, and over 750 credit score, and have over 3 months mortgage saved up in my bank account. In addition, I have 1 house paid off in LA as an asset.

Help the community by answering this question:


No problem. The two homes you own in LA will not prevent you from getting the owner occupied interest rate on your new home in San Francisco.. Your down payment, cash in banks, and credit score make you a prime borrower and unless you are not revealing something, you should be able to get the best mortgage available (30 year fixed) at the lowest interest rate possible, without any problems at all.

Sometimes a home used as a rental property can be a detriment, even though it is earning cash flow for you. Lenders underwrite rental property like this: take the monthly gross rental income and multiple it by 75%, then deduct the monthly mortgage payment, real estate taxes, property insurance premium, home owner dues (if any), and mortgage insurance (if any). The final number is what the lender will use as your rental income. A positive number will count toward your debt to income ratio and a negative number will be a detriment. It's the 25% the lenders take off the top of the gross rental income that may cause a problem for a borrower. They do this to cover possible vacancies, maintenance and repairs, utilities you may pay, etc.

Sounds like you have all your ducks in order. Congratulations. If you need assistance purchasing a home and obtaining a mortgage for your San Francisco home, call me.
1 vote Thank Flag Link Wed Feb 15, 2012

Your new home can qualify as owner occupied as long as you occupy it and can show that your position is based in SF.

I noticed you mentioned that you have a separate home in LA paid off as an asset. It leads me to beleive that you rent it out and may have experience as a landlord. Depending on income and other circumstances, it seems that you would be a great candidate to purchase.

I would love to sit down with you and discuss your options.

Ivan Diaz
Home Mortgage Consultant
Land Home Financial
415-271-7740 cell/direct
1 vote Thank Flag Link Tue Feb 14, 2012
i am trying to buy a second home right next door to the one I own... I am finding some difficulty with getting a rate under 4.00%.. I have twenty percent and want to rent my second purchase to my daughter... 756 on credit... assets over 37,000.00 401k in the range of 120,000.00.... I am using a broker and could this be the reason why? I have an appointment with BOFA on Tuesday... Is it better to go straight to the bank or stay where i am at? thanks rob
0 votes Thank Flag Link Thu Aug 30, 2012

Yes, this can get tricky but if you are renting a property out then you would not be able to secure an owner-occupied loan. Have you talked to your mortgage broker about this?

I'm happy to help where I can so feel free to give me a call: 415.305.4911 cell.

Thanks and welcome to SF!


Rich Bennett, Realtor in SF since 2002

http://www.76-78Prosper.com http://www.115-117States.com

Zephyr Real Estate
0 votes Thank Flag Link Fri Feb 17, 2012
As John mentioned, regardless of your credit score and other factors you mentioned, the issue is going to be your debt to income ratio. Depending on the mortgage product/lender - you'll need a D/I ratio most likely in the 45-50% range. Again, different lenders have different requirements - and using a higher ratio usually means you'll need 6-12 months of "reserves" on one, or both, properties. Your best bet, will probably end up being to rent the home in LA for long enough that it is considered a "primary residence converted to a rental". Generally, this allows you to "offset" around 75% of the rentals mortgage payment, so it doesn't get factored into your ratio.

The other way around this, is to have sufficient equity (appx. 25%) in your LA property. I don't know what you bought the home for, what it's worth, and what you have paid the loan down to......to determine if this is the case.

I would call around and get some opinions from mortgage professionals about what the best course of action is for your situation. Most reputable ones should be able to tell you right away if this is going to be feasible or not, and also explain to you all your options.
0 votes Thank Flag Link Tue Feb 14, 2012
I'll be happy to refer you to a mortgage veteran who will be able to address your question in detail. Feel free to call me at 415-929-5820 x272.
0 votes Thank Flag Link Tue Feb 14, 2012
They won't do the loan as a primary loan if you have a tenant in there. It's easier to discuss in person as it can get complicated. Feel free to give me a call!

Kevin Kropp
Vanguard Properties
415 606-1415
0 votes Thank Flag Link Tue Feb 14, 2012
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