Victor, Home Owner in 93551

Want to purchase & finance a third home (and rent out my current two homes)

Asked by Victor, 93551 Sun Apr 25, 2010

I'm currently renting out my financed home (second month into a one-year lease) and I'm living in a smaller home that I own outright (I've only been living in this second home about 4 months). This means I would be renting out two homes (one financed and one owned) and I would also be financing the home I want to move into. I have excellent credit (780)
* My reason for moving is (1) I want my child to remain in his current school (my child was allowed to remain in his old school district when we moved into our current home but the district is forcing us to change schools unless we return to live within that district's boundaries) and (2) I want to upgrade to a bigger home with a pool.

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Your question is much more complex than you think. There are so many variables that would have to considered. Some, but not all, have been brought up in the prior answers. Your best bet is to sit down with your lender and have them crunch the numbers for you. That is the only way you will know for certain if you can do this and how much house you can buy. If you need a referral to a great, local, direct lender and/or a mortgage broker who actually delivers loans on time, please contact me directly. If you already have a lender, then get them your information and have them give you the answer. Dare to Dream.

Shel-lee Davis, CDPE
Your Real Estate Consultant for Life
RE/MAX Palos Verdes Realty
0 votes Thank Flag Link Sun Apr 25, 2010
Hi Suheyvic,
Good Morning, Im sorry to hear about the problems your having with your school district. I'd like to help you rent out your homes and find you that new, larger home with a pool. Could you tell me please what area the homes you wish to rent are located and what area are you wanting to purchase the new home in? I would also like you to know that I work with some wonderful loan brokers that would be able to help you with financing. Please call me so we can discuss your needs further.

Tracy Moses
Pinnacle Estate Properties
17327 Ventura Blvd.
Encino, CA 91316
818-458-3888 direct
0 votes Thank Flag Link Sun Apr 25, 2010
Hi Suheyvic,

Sorry to hear that the school district changed their mind on you... I do not see a question being asked here, but if you are wondering if you can accomplish what you explained above, then yes, you should be able to, however, to be sure, I have a couple of questions for you:

- How long ago did you purchase your financed home? To qualify for an "Owner Occupied" home loan with the best rate & terms, you need to have owned the property for at least 12 months.
- What is the approximate value of your financed home and how much do you owe? You will need from 25% to 30% equity in the financed home you just rented out (depending on which loan program you decide is best for you & your family) to be able to use the rental income to offset your debt-to-income ratio's.
-How much are you looking to invest in your new home purchase in terms of a down payment?

Your answers will determine which loan programs you may qualify for to finance your new purchase.

All the best,

Roswell Moore, CMPS
Certified Mortgage Planner
480-422-5095 direct
Web Reference:
0 votes Thank Flag Link Sun Apr 25, 2010
There are some catches here if you intend on financing the 3rd home.

1. Did you purchase the new home with an FHA loan? If yes, then getting FHA financing 4 months later is going to be near impossible. Use conventional financing and be prepared for a fight at underwriting. If you have any documentation regarding the school allowing you to stay withing their district and then reneging on you then you will have a better chance of winning this fight.

2. You can avoid this fight by purchasing the home an investment home with conventional financing where you will get less than desireable pricing. Banks dont like it when you buy more than one primary in under 12 months no matter what the reason is.

3. Income calculation and Debt to income ratio's. Since you just leased out the first home 4 months ago and moved you will likely be able to use the income from that home. However, you will not be able to use any future rents unless you have 30% equity and you have a lease agreement in place with first months rent deposited in the bank at the time of closing. They will likely verify the value of the home with an appraisal to determin 30% equity.

4. Last and not least. You also need to be aware that the contract you signed on the second home may have a stipulation regarding how long you must live in it as your primary. It could be 12 months or 6 months. Review this documentation. Otherwise, when you go to change homes and you rent out the 2nd home and change the insurance to a "tenant policy" the bank will be notified by the insurance company and the bank may enforce whatever penalties they have. This is not likely but a possibility. If you do not change the policy to a tenant policy and the tenant gets injured and decides to file a law suit the insurance company are likely to not pay the claim as you did not have the proper coverage.

I hope this helps. You have great reasons for wanting to move but you definitely have a fight ahead of you on the financing side of things.
0 votes Thank Flag Link Sun Apr 25, 2010
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