Help with Two Homes

lucknowm · Joined: 10 Sep 2007 Posts: 1 1.67 Dollars($)

I want to rent out my house, which has only $100,000 loan outstanding. Meanwhile I want to use my equity ( $700,000 ) as leverage to buy a $1 million house, with only 10% cash down. My Debt/Income ratio in this case turns out be almost 60%. ( much higher than 36% norm ).

The lender is asking me to take out a home equity home ( from different lender ) on current home and use it towards down payment.

This is what confuses me. If I take home equity, won't that show up against my credit report when I apply for another mortgage ?

larry · Joined: 27 Jun 2007 Posts: 3328 473.51 Dollars($)

Hi Lucknowm,

Welcome to the forum.

Why will you borrow a new loan for funding the down payment? In that case, you will have to manage two payments - one towards this loan and the other towards the outstanding balance of the existing loan. Then you may face financial difficulties.

You can get the fund for down payment from other sources like the gift fund, money from IRA, or from any government and non profit organizations. To know more on down payment assistance program, you may refer to http://www.mortgagefit.com/down-payment.html

miller_st · Joined: 17 Jan 2007 Posts: 917 168.84 Dollars($)

Before taking mortgage you should look to bring down the dti ratio. At 60% it is way too high right now.

Miller

ezmortgageloanz · Posted: Tue Sep 11, 2007 11:43 pm Post subject:

The advise you are receiving doesn't make a great deal of sense---you are correct, taking out a HEL or HELOC would show up on your credit report, affect your DTI and ultimately lower your credit score.

It sounds like the lender is betting on the bureaus not recording the new HELOC before funding the new purchase.

If you decided to sell your primary residence (instead of renting it), you could use a bridge loan to do what you are seeking to accomplish.

Regards,

Scott Miller

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