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Loan Options for Second Primary Residence

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Valued Member

Loan Options for Second Primary Residence

Any advice is greatly appreciated.

 

Here's our situation:

 

Gross Monthly Income:  $9,600

Credit Card/Student Loan:  $300/month

FHA Loan P&I, Taxes, PMI and Insurance on current residence purchased in 2006: $1,214 (no equity)

Very strong employment history

 

We would like to get a low down payment (potentially a 203k FHA) mortgage for a second primary residence, while renting out our existing home.  We do not need the rental income to qualify, though homes in our area for rent do not last long on the market.  In fact, I have two people interested currently to rent our home $200 more than our monthly payment.  The loan we would seek would be no more than $240k, with approx $600 per month in PMI, Insurance and Taxes.  Based on this information our DTI would be 31% front end (including both mortgages) and 33% back end.

 

My question is what type of loan might be best to investigate, if any.  What type of reserves might we need...basically, is this possible or just a dream.  Any advice on where to start is greatly appreciated.  Thanks so much!

 

 

Message 1 of 11
10 REPLIES 10
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Established Contributor

Re: Loan Options for Second Primary Residence

FHA does not allow a borrower to have 2 mortgages except under special circumstances - and is not designed to have an investment property:

 

Here are the reasons and the exceptions that may allow someone to have 2 concurrent FHA Loans.

  • Increase in family size– There must be an increase in family size in which their current house can’t support the new family member(s). You will have to prove the increase. Also, you must have 25 percent equity in your current home or pay it down to 75% LTV (loan-to-value).  An FHA approved appraiser must be used to determine such new value.
  • Relocation – If the borrower is relocating and it is established that they aren’t in reasonable distance from their current property. Keeping in mind that reasonable can be defined differently from any lender.

Note – If that borrower(s) returns back to the same area, they are not required to re-establish residency in that property in order to have another FHA insured mortgage.

  • Vacating a jointly owned property – A borrower my leave a property and be eligible for another FHA loan if the co-borrower is to stay in the same property that is being vacated.

A good example of this is because of a divorce and that the vacating spouse needs to buy a new home.

  • Non-Occupying co-borrower – If someone previousily co-signed for a family member or relative while using a FHA loan.  This type of FHA loan is called a non-occupant co-borrower loan. This borrower would still be eligible to purchase their own home using a FHA mortgage.

Without meeting any of these requirements, a potential borrower would not be approved for a second FHA insured loan.

Message 2 of 11
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Community Leader
Super Contributor

Re: Loan Options for Second Primary Residence

If you don't meet any of the requirements 203bravo laid out for a 2nd FHA loan then there is another rehab loan program called Fannie Mae HomeStyle Renovation Loan which just requires a 5% down payment on the purchase price + cost of rehab, lenders are typically looking for a 680 score for that program.

Helping people with mortgages (FHA, VA, USDA, Fannie, Freddie, Non-Prime, Construction, Renovation/Rehab, Commercial) since 2002
Located in Orange County, CA and lending in all 50 states
Message 3 of 11
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Valued Member

Re: Loan Options for Second Primary Residence

Thank you both for the response. We don't meet any of the conditions for a second FHA loan. I've been investigating the homestyle loan and it sounds perfect. The problem: finding a lender who offers it. I can't find any database of lenders even on the Fannie Mae site. Any ideas on how to locate one or names of reputable lenders who offer this product? Thanks again!
Message 4 of 11
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Senior Contributor

Re: Loan Options for Second Primary Residence

Have you asked your LO if they do homepath?  My lender is a tiny office, one lady, but she says we could do the Homepath bc they work with Fannie Mae.  Oh well, if you don't have an LO then you will have to call around, or I believe on the Homepath site itself it gives you a list of lenders, realtors etc in your area.

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Message 5 of 11
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Community Leader
Super Contributor

Re: Loan Options for Second Primary Residence

Booner is correct, there is also the Fannie Mae HomePath Renovation loan program.  HomePath financing has two features, the regular loan program that doesn't include repairs, and then the renovation version.  Both versions have to be used at properties listed at http://www.homepath.com.  That is different than the HomeStyle loan program though, which does not have to be for homes listed at that website.

Helping people with mortgages (FHA, VA, USDA, Fannie, Freddie, Non-Prime, Construction, Renovation/Rehab, Commercial) since 2002
Located in Orange County, CA and lending in all 50 states
Message 6 of 11
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Established Member

Re: Loan Options for Second Primary Residence

I too am in a similar position and we're looking at the HomeStyle mortgage program. I'm having a hard time finding out the DTI ratio requirements? Does anyone know? If so, are lenders normally lenient with this? Thanks everyone!!! (right now, we're hovering around 38/41)


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Message 7 of 11
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Community Leader
Super Contributor

Re: Loan Options for Second Primary Residence

For the HomeStyle program with 20% down it's regular Fannie Mae guidelines, 49.99% max DTI.  With less than 20% you are bound to PMI guidelines, which are 41-45% DTI.  Housing ratio isn't terribly important with conforming financing, but usually cuts off at about 44.99%.  The HomeStyle program isn't any more lenient than the regular Fannie Mae loan programs.

Helping people with mortgages (FHA, VA, USDA, Fannie, Freddie, Non-Prime, Construction, Renovation/Rehab, Commercial) since 2002
Located in Orange County, CA and lending in all 50 states
Message 8 of 11
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New Member

Re: Loan Options for Second Primary Residence

I was just on the HomeStyle site

http://www.renovationloans.com/fannie-mae-homestyle.html

and it says the program is not currently available.

 

Does anyone else have a site that is different?

 

Thanks


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Message 9 of 11
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Established Member

Re: Loan Options for Second Primary Residence

Thanks Shane for the thorough info!


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