mortgage questions... buying a 2nd house, renting first one

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My wife and I found a home for sale by short sale. The current owner and lender who approved the short sale has accepted our offer on the house, continegent on our ability to obtain financing and a home inspection.

My wife is a property manager and will pretty easily be able to get our 1st home rented. How does that come into play on financing for the 2nd home, as income? We have a second mortgage on our 1st house, and our rental income will not cover the entire first and second mortgage. It will be about $200 short per month. Last time we checked my FICO was high 600's and her was mid-600's. We have about 15k in credit card debt, 12k in student loans, and NO car payments and will be able to put down around 10k. The morgtgage amount will be about 155k and we make 70,000 combined. We have a couple non-sufficient funds fees on our checking account every month because of my laziness at keeping the account balanced. Do you think we'll get approved?

jameshogg

Hi eric,

Welcome to forums.

The lender will consider a part of your rental income, say 75%, which remains after paying off the utility bills, maintenance costs, etc. From this amount of money, he will subtract the sum of the monthly mortgage payment, taxes and insurance premium.

If the difference between the two is a positive figure, he will add it to your income and consider the total in qualifying you for the loan.

Thanks

helping_user

Welcome Eric.

Considering the amount of debt that you have yet to pay, I think you should pay off the non-sufficient funds fees and try to keep the account balanced so that the fees don't go on increasing. Otherwise it will be tough for you to manage all the loans as well as these extra fees.

Now when you buy the house with a mortgage, you will be in fact having 3 loans - Two on the first and one on the second. But will you be able to manage all the loans along with the credit card and student loans? You need to decide upon this before going for another loan.

By the way, can you wait for some more time before buying a house? I mean if you can pay off the bulk of the debt and then go for a new home, then it will be easier for you to manage your finances. Or if I at all urgent to buy the home, then you can make up for the shortage with the help of any extra source of income. What do you say?

gmakerley · Posted: Thu Feb 14, 2008 2:21 pm Post subject:

i suspect you will be approved but you haven't stated your monthly obligations on your other debt - that is, of course, important information.

you ought to have been prequalified prior to making your offer on that home; now you are faced with the need to obtain a mortgage without knowing beforehand how your situation will be viewed.

make it a point to quickly speak with a lender to get your mortgage application in process.

obviously, you won't have to pay off fees, as they are absorbed when you make deposits anyway - keep in mind that some lenders will view your asset accounts unfavorably because of they way you handle the checking account. it is always good business to keep your account balanced.

lisascherzer · Joined: 04 Jan 2008 Posts: 599 69.58 Dollars($)

Hi Eric28,

The shortage on the rent will just be added into your obligations, It is a matter of how much your income is to cover the shortage with all other obligations. I would think that you still have a good chance of being approved.

charlesarmbruster · Posted: Wed Feb 20, 2008 1:26 pm Post subject:

Certainly, you want to pre-approve any purchase of this type with your loan officer -- this can be accomplished very quickly. Otherwise, you have wasted lots of time and effort.

Application with your mortgage consultant will help you determine three things: 1) the price of the home you can afford, 2) the amount of money you afford to pay in a new mortgage, and 3) the proof you need to present to the seller, the bank.

The last thing you want to have happen is to be in a situation where you might put non-refundable money down on a purchase that just won't happen. Go get it! GOOD LUCK!!

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