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Would like to buy a 3rd property

djrkd 21 14 January 12, 2016 at 07:32 AM
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Here is my situation:

currently own two homes:

1. Home where my mom and dad live - Mom and I are both on the mortgage. Balance is about 110k, 25 years left. Home is worth about 160k if that matters.

2. My condo - I am alone on this loan - 27 years left, owe about 70k on it, worth about 130k

I would like to turn my condo into a rental - My loan, tax, insurance is about 600$ a month. I should be able to rent it out for 1000-1200$ a month

I would like to move to the city - and purchase something around 300k.

My income in 80k, I have perfect credit. When I was buying my condo 3 years ago, the banks were super tight and cautious with giving out loans and They wouldn't let me borrow much more. I understand I cant use my parents place as rental.

I don't have any other debt, just a car lease which is 450$ a month (I know this wont look good)

Any chance ill get approved for another mortgage?

5 Comments

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#2
Turning your condo into a rental won't get you anything in terms of loan approval, they will want to see 2 years of income on that. They will want to see a debt to income ratio of 45% or less.
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#3
Do you have at least 20% down? IMO income is too low for purchase price especially with current debt. Car lease doesn't help the situation. I'm no expert so your best bet is to find a broker
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#4
This requires a little creativity-- if I were in OPs shoes, I would try to buy a duplex, with intention of renting one unit and living in the other as primary residency (bank will request appraisal to be done for estimated rent which will bring down debt to income). Worked for me on 30 year conventional fixed rate.
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#5
Quote from djrkd View Post :
Here is my situation:

currently own two homes:

1. Home where my mom and dad live - Mom and I are both on the mortgage. Balance is about 110k, 25 years left. Home is worth about 160k if that matters.

2. My condo - I am alone on this loan - 27 years left, owe about 70k on it, worth about 130k

I would like to turn my condo into a rental - My loan, tax, insurance is about 600$ a month. I should be able to rent it out for 1000-1200$ a month

I would like to move to the city - and purchase something around 300k.

My income in 80k, I have perfect credit. When I was buying my condo 3 years ago, the banks were super tight and cautious with giving out loans and They wouldn't let me borrow much more. I understand I cant use my parents place as rental.

I don't have any other debt, just a car lease which is 450$ a month (I know this wont look good)

Any chance ill get approved for another mortgage?
"Turning your condo into a rental won't get you anything in terms of loan approval, they will want to see 2 years of income on that." This is wrong. Definitely should not be giving out advice.

You can use the rental income you will receive to offset your payment. A lender will give you 75% of whatever you receive so your payment would be covered plus you might get a small portion as income. You just need a signed lease and a copy of either first months rent or a copy of the deposit.

You're correct about the home you own with your mom unless you show it on your taxes as rental income. Your car lease makes no difference in the matter other than it's a liability and counts toward your Debt-to-Income.

With your condo payment covered from the future rent it would just depend on how much your payment is on the house you share with your mom. You can possibly get away with excluding that loan if you can show your mom pays the payment from her account and has for at least the last 12 months.

As far as qualifying, just use 43% of your gross ($6,666) which is $2866 (you can technically go to 45%, but I like to leave a small buffer.) Not giving you any credit for your rental, but not hitting with it either, you can have up to $2866 in total dept including the new house payment, house you share with your mom, and your car lease. Once you subtract the house payment and the car loan, you'll know what you have left available for the new house payment, Remember to include PITI and MI if you're putting less than 20% down.

PM me if you have any specific questions. Just so you know, this is what I do every day. I've been in the mortgage business going on 12 years now.
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Joined Dec 2011
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#6
Quote from Boomancini View Post :
"Turning your condo into a rental won't get you anything in terms of loan approval, they will want to see 2 years of income on that." This is wrong. Definitely should not be giving out advice.

You can use the rental income you will receive to offset your payment. A lender will give you 75% of whatever you receive so your payment would be covered plus you might get a small portion as income. You just need a signed lease and a copy of either first months rent or a copy of the deposit.

You're correct about the home you own with your mom unless you show it on your taxes as rental income. Your car lease makes no difference in the matter other than it's a liability and counts toward your Debt-to-Income.

With your condo payment covered from the future rent it would just depend on how much your payment is on the house you share with your mom. You can possibly get away with excluding that loan if you can show your mom pays the payment from her account and has for at least the last 12 months.

As far as qualifying, just use 43% of your gross ($6,666) which is $2866 (you can technically go to 45%, but I like to leave a small buffer.) Not giving you any credit for your rental, but not hitting with it either, you can have up to $2866 in total dept including the new house payment, house you share with your mom, and your car lease. Once you subtract the house payment and the car loan, you'll know what you have left available for the new house payment, Remember to include PITI and MI if you're putting less than 20% down.

PM me if you have any specific questions. Just so you know, this is what I do every day. I've been in the mortgage business going on 12 years now.
Thanks Boom!

When I was getting my condo loan the loan person said I would need "6 months of rental income" to prove that the place is a rental, and this was 3~ years ago when the market was still tight and recovering. Sounds like this might be possible. Worst case is I might need to have my mom co-sign, her income is pretty small but hopefully it will be enough to put me over. Any con's to doing this?
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