Home Buying in 92028>Question Details

Jennifer Pla…, Other/Just Looking in Fallbrook, CA

We are thinking about purchasing a second home, but we are confused about how much we can qualify for now.

Asked by Jennifer Platt, Fallbrook, CA Wed Sep 10, 2008

Is it true that if our current home doesn't have 30% equity we can't use the rent we receive as income?
What are the debt to income ratios allowable for real estate?
We have someone who will rent our current home when we leave and we are looking for something in the 300,000 range and we have 3 1/2 to put down. The only thing stopping us is the 30% equity rule.

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Jennifer, Everything depends on everything else. By that I mean that there is no component of financing that stands on its own. Type of mortgage (VA, FHA, Conventional all have different criteria). Debt to income ratios are not set in stone for most products. Assuming you are looking for a FHA loan, what is the LTV of your current property? If you are underwater, the new investor will make the assumption that you are trying to buy before you do a strategic walk away...and that is the kiss of death. Talk with a finance professional and get the real answers so you can make informed decisions.
0 votes Thank Flag Link Thu Oct 21, 2010
Hi Jennifer:
You seem to be in a pretty decent buying situation. Would you be buying your new home in Fallbrook? There are some quite nice homes in your price range in Fallbrook these days.

I know and have referred some very high caliber lenders in both San Diego and Riverside County. Get one who will be totally honest with you. It's best to go to your lender and lay all your cards out on the table.

And, as an aside, if you happen to have any side businesses, please tell your lender about them. One of my buyers was so close to closing a deal when underwriting threw us a curve -- besides being a nurse, she had a small T-shirt business that really didn't make her any money -- but it held up everything! Feel free to contact me for a short list of lenders who have come through for my buyers. Best, Thalia
0 votes Thank Flag Link Thu Oct 14, 2010
Jennifer: Lending guidelines change often. The best thing for you to do is to speak to a Lending professional who is a Direct Lender, who can keep you updated as things change.

This way the Loan Officer can update your loan pre-approval as needed so that you can provide the best documentation necessary and make your offer as good as possible. It's very competitive right now and having all of the best possible pre-approval submitted with your offer will help.

Web Reference: http://www.soreal.biz
0 votes Thank Flag Link Thu Dec 31, 2009
Hi Jennifer,
I want to make sure that I'm clear on what you are looking to do. So you own the home that you currently live in now and are planning on buying another home as your primary residence? You will be moving out of your current home, renting it out and moving into another property? Even though the 30% equity rule does exist the good news is that there are a lot of ways to structure a loan for approval. For example FHA guidelines do not have a 30% equity requirement on your current home and will use 75% of the rent. Debt to income ratios vary from investor to investor and compensating factors can help with approvals as well. Give me a call when you have some time and I will answer and address any concerns you may have in more detail.

All the best,
Alex Caragiannides
0 votes Thank Flag Link Wed Sep 10, 2008
Dear Jennifer,
I have a few clients that are in the process of searching for second homes. While it is a harder to get loans for second houses in this market, it is not unattainable. My suggestion to you is to seek the services of a Mortgage expert who can run your financial picture and see what is possible and what is not. On a side note...as I tell all my clients, let's learn from this mess and make sure whatever you are purchasing does not leave you in a paycheck to paycheck or rent check to rent check situation.
I have utilized ALEX CARAGIANNIDES --branch owner of the lending group with my clients whom are pruchasing income properties and second homes, he is honest and efficient. His number is: Office: 619-238-0018 maybe he can help you get a better idea of what your position is.
Web Reference: http://www.abellre.com
0 votes Thank Flag Link Wed Sep 10, 2008
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