Home Buying in Scottsdale>Question Details

replylynn, Home Buyer in Oakland, CA

what if i don't want to live in the rental property i buy. how does that affect my new loan?

Asked by replylynn, Oakland, CA Thu Nov 15, 2012

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Bill Parker, CPA*’s answer
Hi ReplyLynn:

If we assume you are going to be buying using a "normal loan" (not private money), then you can not use FHA as they are Primary homes only when purchasing. That means you will be going with a Fannie or Freddie loan, most likely.

Contrary to what most people tell you, there is no difference between the interest rate for a primary and an investment property. The difference is lenders charge "Points" for investment properties, due to the higher risk borrowers will default--1.75% of loan amount if you do a 75% or less Loan-to-Value (LTV) loan; 3.00% of loan amount if you do a 75.01% to 80% LTV loan. Most people do not want to come in with this much money, so they have part of it paid by accepting a higher interest rate (hence, the myth of "higher rates for investment properties" perpetuated by many in the real estate and lending industries).

I may be wrong, since Brenda says she has seen 15% down, but my understanding is there is no Mortgage Insurance available for investment properties at this time, which means the minimum down would be 20%. Also, I believe (after looking at two of my lender's guidelines to refresh my memory) that 3% down with the HomePath program is only allowed on primary residences. The minimum down for an investment property is 15% with a minimum credit score of 660 (20% down with a minimum credit score of 620)--possibly this is where the 15% down comes from, but only for HomePath loans, not "normal" loans.

I hope this helps. Good luck in you property search.

Bill Parker, Loan Officer
AZ Lic# 09011570
NMLS #223607
CPA--Licensed, no longer practicing

GenCor Mortgage Inc.
15730 N. 83rd Way, Suite 103
Scottsdale, AZ 85260
(O) 480-525-8496; (M) 602-565-3646; (F) TBD
EM: BParker@GenCorMortgage.com
Website: http://www.GenCorMortgage.com
LinkedIn: http://www.linkedin.com/in/billparkercpa

MISSION STATEMENT: To create an unbelievably enjoyable experience for my clients, while guiding them through the most important financial transactions of their personal lives. My clients know me as their Mortgage Lender for Life. I truly appreciate your referrals.

If you think it's expensive to hire a professional to do the job, wait until you hire an amateur.
Red Adair, Oil well firefighter
0 votes Thank Flag Link Thu Nov 15, 2012
I am both an investor and property manager in addition to helping buyers and sellers here in Scottsdale, AZ. Investment properties require 20% down and you can typically improve on the interest rate if you put 25% down. Do not get caught up in potential lender fraud by telling them you are going to live in it and then just turn around and rent it out.

I would love to help you in your decision making process and in finding your new home. I am a full-time REALTOR and work very hard for my clients. There are many great agents out there. Pick someone you like, can relate to, feel comfortable with and trust.

If I can be of service please call me at 602-390-8088 or email me at howardrudin@yahoo.com.

I wish you all the best.

Sincerely,

Howard Rudin
WEST USA REALTY
602-390-8088
0 votes Thank Flag Link Mon Nov 26, 2012
I have two homes that are rentals and this will not effect your financing. They will require you to show that you can afford the home + whatever home you currently live in. Once you have the home rented for 2 years, you will be able to purchase another one (assuming you want to grow your rental base).

I have never had to put 15% down; I have always put 3% down. Just be sure to be honest with your lender so nothing comes up later down the road.

I have worked with an amazing loan officer at Bank of America if you would like his information.

Hilary Lockhart
Realty ONE Group
480-213-5673
0 votes Thank Flag Link Sat Nov 24, 2012
What Lender allows an investor to put 3% down on a rental property that he does not intend to live in? That is unheard of. I would love the name of the Lender doing this for you as you claim.
Flag Tue Nov 27, 2012
Hi Lynn,

I am not quite clear on what you are asking; are you asking what would happen if you finance your purchase of a new home as your "Primary Residence" or a second "Vacation Home" & you want to rent it out after you buy? If that is your question, then as long as you refrain from renting out your property for 12 months after you move in, you should be fine if you want to rent it out later.

If on the other hand, your intent is to buy a "Primary Residence" or a second "Vacation Home" & then "change your mind" so you rent the property out, you will be violating the terms of your loan documents that you signed, which could cause you serious legal problems in relation to Loan Fraud.

Just be careful & be sure you have a knowledgeable loan originator who will keep you out of the line of fire. Please feel free to contact me directly if you have any further questions, I'd be glad to help.

All the best,
Ros

Roswell Moore, CMPS
Certified Mortgage Planner
480-422-5095 direct
http://www.ezAZloan.com

We are a Direct Lender, Mortgage Bank where we originate, process, underwrite, fund, AND SERVICE our loans, in-house, with FHA (starting at a 580 score AND still only 3.5% down), FHA Streamline refinance loans (NO minimum credit score, NO appraisal required) Go Green rehab loans, HomePath, Investor Friendly (10 financed properties), VA, VA Refinance loans (NO appraisal required on IRRRL loans), USDA loans, Jumbo loans, Conventional loans, plus, we allow Escrow Hold-Backs!
Web Reference: http://www.ezAZloan.com
0 votes Thank Flag Link Thu Nov 15, 2012
Owner/Occupied houses get a better Interest Rate and Lower Down Payment:
Some Buyers think they can lie to the Lender to get the more favorable terms.
This could be a big mistake; very bad downside!
If it is an Income Property, there are all kinds of Tax deductions; it would be foolish to try anything untoward with the Lender.
0 votes Thank Flag Link Thu Nov 15, 2012
You could find lenders that will lend with less than 20% down. I have seen 15% down. But you can also buy a Homepath home using 3% down. No PMI. No appraisal.

Best Regards,

Brenda

Ron & Brenda Cunningham
West USA Realty
602-980-3133
Ron 602-499-0694

*** Recognized in the Phoenix Business Journal as "One of the Top 50 Realtors in the Valley" ***

Search the Official Active FlexMLS like a Realtor through our website for FREE:

http://www.CunninghamHomesAZ.com
0 votes Thank Flag Link Thu Nov 15, 2012
A property that you don't intend to live in will be treated as an investment property and require a greater percentage of down payment. Most investment property buyers put down 20% of the purchase price or more to get favorable interest rates and programs.

We also manage rental properties, if you purchase a property and would like professional management we would be glad to offer our services.
0 votes Thank Flag Link Thu Nov 15, 2012
You will probably be looking at putting 20% down and a bit higher of an interest rate. The upside is since it's an investment property it would qualify for a 1031 tax exchange if you wanted to sell it down the road and invest in another investment property.

Gene Montemore
Real Living Success Realty
gene@CentralScottsdale.com
0 votes Thank Flag Link Thu Nov 15, 2012
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