Requirements for second home mortgage

[p-]

DW and I are looking at a couple of homes that are priced very low and need updating.  We are considering purchasing one without selling our existing home, and spending six months renovating before moving in.

I know what I can get done on a primary residence mortgage, but am not sure what we have to do to qualify for financing on a second home.  Can anyone here with experience or knowledge of this area help me with some questions?

 - What is the minimum down payment required for a second home with traditional financing; i.e. traditional 20%, or can I do 80/20 80/10, etc?

 - What are the basic credit requirements?  DW and I are solidly in the 700's with 4 years of good mortgage payment history.

 - What is the DTI requirement?  

 - Can I still do FHA, and if so, is there a possibility of financing up to 97% LTV?  If not, what is the min down for FHA?

 - Are interest rates higher for second home mortgages?

Our intent with all of this is to take advantage of the depressed market, get a great deal on more square footage in a nicer area, and hang on to our existing house through the ramp up in pricing.  Our current mortgage payment is only 9% of our gross income.  Value estimates our current home loan at 92% of home value, however a comparable home on the same street sold in less than 30 days for 10% more.  We have some savings for down payment, but the less we have to put down, the more we can spend on renovating.

Thanks for the help;

[JM-AM]

Just a few quick responses

Yea you can get a 2nd home.

You still have to qualify with your DTI.

Your scores in 700's should be fine.

Rates are generally little higher with investment properties.

I took it as though you were moving in to new house if purchased. But I wasnt sure what your plans are for your original home you live in now. Which is why answers are more vague.

[p-]

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@JM-AM wrote:
Just a few quick responses

Yea you can get a 2nd home.

You still have to qualify with your DTI.

Your scores in 700's should be fine.

Rates are generally little higher with investment properties.

I took it as though you were moving in to new house if purchased. But I wasnt sure what your plans are for your original home you live in now. Which is why answers are more vague.

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We will move into the new home, but only after some updating/renovation.  The old house would then get fresh paint, light updating, and go on the market about three to six months after the first home was closed.  There will be a period during which we would pay both mortgages.

If the new home was an 80/10 or 80/20, the proceeds on the old home would go toward paying that off.  The old home is not a good candidate for rental.

[p-]

If I am going to do an 80/10 or 80/20, can I still use a bank or credit union like Pended, USAA, or Wells Fargo, or do I have to use a broker to put the package together?

[JM-AM]

You can use any lender as long as they still offer what you are seeking.

[violetsmom]

We are buying new and not planning to sell our current home.  We bought right at the top of the market in late 2004.  We planned on staying maybe 4 years.  Yeah, that didn't work out so well.  Comps in our neighborhood are going for about $10k less than what we owe so we are going to rent it out, our house is very rentable though and the rental market is very hot in my area and has been for a while now.  We are using a program through our builder called a guaranteed lease, that is for another post though.

To qualify, we had to include our current mortgage payment in our dti.  We are very fortunate as both my husband and I make more than two times what we were making in 2004.  Also, since our current mortgage is an FHA we were not allowed to get another FHA loan so we had to go conventional (only one FHA loan allowed in most cases, unless your current home has some equity).  We also were required to provide proof of reserves for payments on both properties for 3 months I think.

[p-]

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@violetsmom wrote:

We are buying new and not planning to sell our current home.  We bought right at the top of the market in late 2004.  We planned on staying maybe 4 years.  Yeah, that didn't work out so well.  Comps in our neighborhood are going for about $10k less than what we owe so we are going to rent it out, our house is very rentable though and the rental market is very hot in my area and has been for a while now.  We are using a program through our builder called a guaranteed lease, that is for another post though.

To qualify, we had to include our current mortgage payment in our dti.  We are very fortunate as both my husband and I make more than two times what we were making in 2004.  Also, since our current mortgage is an FHA we were not allowed to get another FHA loan so we had to go conventional (only one FHA loan allowed in most cases, unless your current home has some equity).  We also were required to provide proof of reserves for payments on both properties for 3 months I think.

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Good info - thanks.  Who did you use for financing?

[violetsmom]

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@p- wrote:

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@violetsmom wrote:

We are buying new and not planning to sell our current home.  We bought right at the top of the market in late 2004.  We planned on staying maybe 4 years.  Yeah, that didn't work out so well.  Comps in our neighborhood are going for about $10k less than what we owe so we are going to rent it out, our house is very rentable though and the rental market is very hot in my area and has been for a while now.  We are using a program through our builder called a guaranteed lease, that is for another post though.

To qualify, we had to include our current mortgage payment in our dti.  We are very fortunate as both my husband and I make more than two times what we were making in 2004.  Also, since our current mortgage is an FHA we were not allowed to get another FHA loan so we had to go conventional (only one FHA loan allowed in most cases, unless your current home has some equity).  We also were required to provide proof of reserves for payments on both properties for 3 months I think.

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Good info - thanks.  Who did you use for financing?

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We are using the builder's preferred lender.  They are basically paying our property management company a commission to rent our house out without any expense to us for 2 years (except normal repairs and wear and tear stuff).  We do not have to pay the property management company at all, and if for whatever reason they are not able to rent our house out we are guaranteed at the minumum our mortgage payment.  We are hoping that we can keep this up after 2 years, and keep the current house as investment, or after 2 years we should be able to sell and at least break even.

We are putting 5% down.