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!
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.
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.
A good example of this is because of a divorce and that the vacating spouse needs to buy a new home.
Without meeting any of these requirements, a potential borrower would not be approved for a second FHA insured loan.
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.
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.
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.
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)
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.
I was just on the HomeStyle site
and it says the program is not currently available.
Does anyone else have a site that is different?
Thanks Shane for the thorough info!