Can I make down payment with my current home equity to purchase 2nd property in CA?

Asked by Ray, California Thu Nov 22, 2007

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8
, ,
Wed Nov 28, 2007
Hi Ray,

Regarding this part of your question: "can I convince my future lender (I don't know who he/she is now) that the 2nd property is my main residence (home)?"

The key is, do you plan to actually move into this house within 60 days or so? If the lender has any doubts, they will order an Occupancy Certification which means between 60 - 90 days, someone will go to the property to physically verify that you are in fact living in the house. They will even ask neighbors.

In most cases, if you are "buying up", they will not question it.

I am in the mortgage business and I have an extensive underwriting and loan origination background. I have addressed this issue with lenders many times.
2 votes
Diane Glander, Agent, Spring Lake, NJ
Sat Nov 24, 2007
It's a great way to purchase additional properties. Another consideration, in addition to the advice given by Mario, is that you are able to afford the equity line in addition to the mortgage you currently hold on your first property.
Web Reference:  http://www.dianeglander.com
2 votes
Mario Pinedo,…, Agent, Cupertino, CA
Fri Nov 23, 2007
As both Dot and Jackie answered - yes you can. What I suggest to my investor clients who are considering this is - look at the home investment as a zero down payment purchase - if you borrow 20% down from your current home and borrow 80% for the investment property - aggregate the loans under the invesment property's analysis - see how that property will support the debt and expenses on its own. In the Bay Area it is very realistic that there will be negative cash flow - you then have to decide whether the appreciation factor will outweigh this over the long term. If you want me to help you analyze a deal, I'd be glad to do so.
2 votes
Mario Pinedo,…, Agent, Cupertino, CA
Wed Nov 28, 2007
Anything is possible - it may take some finessing though. Usually if the 2nd home is larger, more expensive or in a better area than the first - a lender is more likely to believe you are trading up and will live in the new home. What helps when getting a little creative with financing is having a mortgage professional who has long standing relationships with his utlimate lender and/or underwriter.
1 vote
Dot Chance, Agent, Burbank, CA
Thu Nov 22, 2007
Yes. I know a great mortgage professional you can talk to. Her name is Marie Richarz and she is with Metrocities. She is very knowledgeable and great to work with (nope - I don't make any money from referring business to her). Contact me if you would like to have her contact info
Web Reference:  http://www.DotChance.com
1 vote
Jackie Blank…, , North County, SD
Thu Nov 22, 2007
Hi Ray. Yes, this is possible. However, there are a lot of things to consider before making this decision. Depending on your financial deligence, current pmt. structure and what you plan to do with the 2nd property, it may be a great idea. Good luck to you!
1 vote
Douglas Moore, , 94598
Mon Dec 3, 2007
Ray-
In regard to your second question about the second purchase being accounted for as your primary residence, only do that if it is, in fact, your primary residence. Aside from the illegality of doing otherwise, it is not worth the risk to get a loan under false pretenses. I don't care how many people do it, it will bite you hard and you will potentially lose a lot of money if things go wrong and the tax officials and/or lenders find out about what you did. Keep it honest and keep up the good work on the family business.
Web Reference:  http://www.apr.com/dougm
0 votes
Ray, Home Buyer, California
Sat Nov 24, 2007
Hi Jackie, Dot, Mario, and Diane, thank you all for your professional replies. I feel optimistic and confident after receiving your positive feedback. I'm running a quite successful family business in my first home. I also have at least 30% equity. If I'm allowed to have access to my equity line in my first property to make down payment for my 2nd property (I'm still looking in the Bay Area), can I convince my future lender (I don't know who he/she is now) that the 2nd property is my main residence (home)? Thanks again. Ray
0 votes
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