Purchasing a Second Home

[Anonymous]

I current own a home in VA, which has a tenant in it.  I recently moved to SC for new employment.  I am renting right now but would like to buy a second home within the next year.  I have no debt - no car debt, no student loan debt, etc.  The only debt I have is my house in VA (owe $373k).  My VA house is an FHA loan which I am considering refinancing into a convential loan.  I have about $20k for a downpayment.  With reasonable credit scores, do you think it is possible?  I'm assuming my scores will go up since I just paid off my car ($10k balance) and remaining credit cards (about $20k).  

FICO 8 Scores:

Equifax 677

Transunion 678

Experian 682

[Girlzilla88]

Your scores may actually take a dip since you are taking off the car loan now and downed all your cards, did you pay your cards off Completely?!    If so I would definitely put a small balance on at least your Bank Card (1-5%) in order to try to use the AZ method, but some places will do higher utilization loans so I would just check with whom you are wanting to do the second home through depending on your Income they may do up to 85% utilization etc and it's good you have 20k cushion as well remember if you can do 20% down or 25% down depending on what your state recommends that will help as well! 

[Anonymous]

I did pay off the car and cc's completely to $0.  My income is $110,000/annually and I am looking to purchase a home that is $250k or less.

[Anonymous]

Eek, I probably wouldn't have entirely paid of the auto loan. Ideally paying down 95% and then leaving a small amount would give you a point boost. I have a mortgage that I opened last summer, paid down 1%, but I have old student loans that I've paid down 97% that I'm just let sit until 2024, and they have helped my scores greatly.

Having said that, it seems like you may be in a good position with your investment property. I'd try to play with some AZ data points to get your scores up a bit before they pull your credit.

[sccredit]

I don't think you'll see a huge hit from the car being paid off.  You have a mortgage which satisfies the installment portion.  

[dragontears]

As long as your income can support both mortgages (i.e. DTI still in acceptable range) there is no problem with buying a new home as owner occupied.  It is what I am going to do in a few months. 

[Girlzilla88]

My main concern was the cards all reporting 0, you don't want all your cards to reflect 0 have at least one of your main bank cards to have a 1-5% usage and still use your other cards for a small bit then just pay it off so they don't close your cards or lower your limit due to inactivity and you don't get a penalty for 0% everything that can drop your score.

[Revelate]

Buying a new home would be primary residence.

Refinancing existing, I suspect that's likely to be an investment property given there's a tenant there already and that generally has a higher APR by definition.

I don't know, it's a little loose honestly on the definitions, like I'm refinancing my condo and buying a new one but since I haven't moved yet the refinancing one said technically it's primary residence too even if they're 100% aware that I'm moving... though they told me there was zero difference between primary residence and second home if not renting and I signed my name to a LOE saying it wasn't going to be rented for the purchase lender which is absolutely true in my case.  We'll see the refinance might get delayed on such a technicality which is fine, starting to think there's going to be a .25% rate cut in March anyway and that might follow through to both loans so I'm dragging my feet TBH... while I won't ignore a UW request I'm not poking my LO's at all, take your time .

In your case already renting I don't think you get a pass and it's not worth committing mortgage fraud over, and it's not like FHA loans suck APR wise generally.