What are the issues to get a new mortgage with and unsold home in another state?

Asked by Chris Layton, Minneapolis, MN Thu Feb 17, 2011

would the 28% ratio apply to the old mortgage and new mortgage combined? What sort of cash reserves are required? If you have high enough income are these mortgages straight forward?

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Charles Dail…, Mortgage Broker Or Lender, St Paul, MN
Thu Feb 17, 2011

This is going to be a little thick so call me if any of this doesn't make sense. FHA Guidelines are attached in the web reference below. Fannie Mae guidelines (selling guide, Part B, Subpart B3, Chapter B3-4, Section B3-4.1) are as follows:

*per automated underwriting findings - this means that if the automated underwriting findings say it's ok, it's ok
*if 30% equity or more is held on previous residence then you'll need 2 months worth of PITI payments for both mortgages
*if you have less than 30% equity on the previous residence, then you'll need 6 months worth of PITI payments in reserves for each mortgage
*standard debt to income restrictions apply - usually determined by the automated underwriting findings but not beyond 45%

I hope this helps and good luck!
1 vote
John Chrisney, Agent, Edina, MN
Sat Feb 19, 2011
Over the years I have noticed that most buyers in your situation are uncomfortable with two mortgages (especially when one property is out of state) even if they qualify in the eyes of a mortgage banker. If I were in your shoes, I would rent on a month to month basis until your present home sells and closes, continue looking for a new home during this phase, and get in touch with a mortgage banker to obtain a commitment without the complication of another home to sell. Under this scenario, you will also be able to negotiate more aggressively than if you have a contingency in the wings. Hope this helps...
Web Reference:  http://www.chrisney.com
0 votes
Rudy McDowell, Mortgage Broker Or Lender, Bloomfield Hills, MI
Thu Feb 17, 2011
Without knowing your complete loan profile, I can say that it is possible for you to get a new mortgage with an existing one in another state. Especially if your primary reason for moving is job related. You just have to be able to qualify with both payments.
0 votes
Cameron Piper, Agent, Forest Lake, MN
Thu Feb 17, 2011

It is possible, but I would stongly caution against it. I am assuming you are relocating and would encourage you to find a short term rental and see if you like living in this city or that. This will also provide you the benefit of being able to sell your house without tying you in to two mortgage payments that could leave you strapped for cash and one emergency away from disaster.

Do you a quick search on Trulia and you will find countless stories of people who had it all figured out and bought before they sold and now they have two mortgage and can't afford (or worse don't want to afford) to keep either current. Take the slow boat and delay your gratification of finding a new house until your current home sells. It may be conservative advice but you will be better off for it in the future.

Cameron Piper
Coldwell Banker Burnet
Web Reference:  http://www.campiper.com
0 votes
Tom Buratti, Agent, Edina, MN
Thu Feb 17, 2011
Hi Chris, If you qualify for a new loan with the payment for your old loan included as part of your current debt to income ratio, you should be able to obtain financing. I would recommend talking to an experienced loan officer in Minneapolis to start the approval process. I have several I could refer you to. Thanks for your question and best of luck.
Web Reference:  http://www.tomburatti.com
0 votes
Peter Boyle, , Minneapolis, MN
Thu Feb 17, 2011
The 28% ratio applies strictly to your “Housing Expense” ratio (aka Front Ratio), meaning the new home mortgage payment as a percentage of your income. And with a good credit score and decent cash reserves we can often approve clients as high as 35-39% on this ratio. The important ratio to examine is the “Total Debt” ratio (Aka, Back Ratio). Your previous home payment would be added to any other debt service you have, added to your new mortgage payment on the new house, and divided by monthly qualifying income to calculate this. Most conventional lenders with <20% down payment, hold to either a strict 41% or 45% Back Ratio, while lenderswill exceed the mandatory 45% Debt ratio up to a max of 50%. While FHA can sometimes allow even higher ratios.

I have been successfully qualifying people in this position for many years and would be happy to run the numbers for you if you contact me.

Peter Boyle
0 votes
Mark Claesse…, Agent, Coon Rapids, MN
Thu Feb 17, 2011
HI, Chris . . .

I just got the message in my email that you posted this question and was just finishing a meeting with my loan officer here. I had him read your question and his response was this. First, he laughed and said, "No mortgages are " straight forward" anymore!"

Then he said to tell you that yes, ratios always apply, but the 28% does not. He said there is a max on the back end of 48%. And he would need more information from you in order to discuss the reserves. So he welcomes you to give him a call. HIs name is Tony Lopez, with Edina Realty Mortgage. Phone: 763.754.4765.

He's the best, Chris. In the past 3 months I have had buyers from all walks of life and incomes, and many of which were already "set" on anothe loan officer that they knew or becaue it was "their bank", and they have all - 100% - went with Tony because he literally beat the pants off of the competition. I would recommend giving him a call.

And I would be glad to help you with locating and negotiating the home you are looking for. The best part: I won't cost you one dime!

0 votes
Douglas Katz, , Chicago, IL
Thu Feb 17, 2011
Your main challenge would be in your debt service. You will likely get hit with the payment on the prior residence and that can often wreak havok with your ability to cover all of your debt and remain within the guidelines of a particular program.
Web Reference:  http://www.loanorama.com
0 votes
Steven Hong, Agent, Edina, MN
Thu Feb 17, 2011
Thank you for the good question. Getting a new mortgage with an existing mortgage on another house isn't necessarily an issue. There are several factors that are involved that are unique to each situation. You should talk with a reputable loan officer to determine the answer for your situation. They will take your ratios based on your income and dept and figure it out specifically for you.
0 votes
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