Buying a second House in Irvine

P

pricedoutJay

New member
Has anyone bought a second house in Irvine recently and could you share your experience regarding loan requirement and process, ie DTI ratio being 36% or 43% etc. 

I'm thinking of buying a second home and make it a primary residency for my family and make and let my relative live in current house without making a rental property.  I don't have 30% equity (~25%) and rent I collect from the relative won't be counted as an income.  However, our household income is high enough to cover both houses expense. The second house price would depend on what DTI ratio that lender uses.  I've seen 42 or 43% as a total DTI but from BofA and Wells Fargo websites, they use 36%, which significantly reduce the house price that I could afford.

Any mortgage broker recommendation to handle this kind of non-standard situation would be greatly appreciated.  Thank you.
 
Why don't you want to turn the current home into a rental home?  You can deduct all the expenses (PITI and ANY expenses) in Schedule E.  Unless you paid cash for the current home most likely the net operating cost will be negative and thus deducted from your income.  Especially since your relatives will be living in the house so you can "adjust" the rental income that you receive.  It will help your DTO ratio too. 
 
if he can afford two house payments and stay within the DTI ratios then he probably exceeds the income limits to be able to deduct rental losses. folks like USC trojan and Irvinerealtor qualify as real estate professionals and they can deduct rental property expenses against their normal RE agent income.  so unless its cash flow positive with an acceptable return no point in having a rental unless you think the appreciation will be worthwile and at these prices good luck with that.
http://www.investopedia.com/articles/pf/06/rentalowner.asp
 
pricedoutJay said:
Has anyone bought a second house in Irvine recently and could you share your experience regarding loan requirement and process, ie DTI ratio being 36% or 43% etc. 

I'm thinking of buying a second home and make it a primary residency for my family and make and let my relative live in current house without making a rental property.  I don't have 30% equity (~25%) and rent I collect from the relative won't be counted as an income.  However, our household income is high enough to cover both houses expense. The second house price would depend on what DTI ratio that lender uses.  I've seen 42 or 43% as a total DTI but from BofA and Wells Fargo websites, they use 36%, which significantly reduce the house price that I could afford.

Any mortgage broker recommendation to handle this kind of non-standard situation would be greatly appreciated.  Thank you.
Click to expand...

The new residence that you will buy has to be bigger than your current residence and regardless of whether you qualify without the rental income from your current house they will ask to show proof that you have advertised your current house for rental if you want to get the lower interest rate for the new primary.  I don't think the DTI ratio is different. 
 
Second homes generally have to be 25-50 miles away from your current primary residence, plus they have to be in a "resort" setting. If you live in Irvine it's possible to have a 2nd home in Palm Springs or Oceanside, but not one just off of Culver. This then means you'd have to either structure the new purchase as a rental or a primary residence.

An underwriter will look at property type (Presently owning condo, buying SFR, A-OK, Presently owning a SFR and buying a Condo saying it's going to be owner occupied? no bueno) Square footage (2500 SF, 4b/2ba buying 2,250 SF 3b/2ba owner occupied? Also, no bueno), and distance from work. In some cases a buyer will attempt to purchase a fractionally larger home, but 15+ miles away from their current home as an owner occupied residence, only to have an UW not believe it's owner occupied. It's all really in the facts on the ground and the kind of story the mortgage loan officer can weave for the UW. Some recent examples that had been viewed as owner occupied:

1) Buyer owns SFR, buying similar SFR within 5 miles of their home, but was in a different school district. That factor, plus other items made the difference in the underwriter believing the intention to occupy the new purchase home was there.

2) Buyer has Condo and is buying another Condo. The new home has a 2nd story, yard, and extra garage. Although the square footage was similar, the style and function difference made sense as a "move up".

3) Buyer purchasing a smaller condo compared to recently rented SFR. Based on the time span since the initial renting (6 months) and the prior home lease being for multiple years, the UW believed the intent for occupancy in the new property was there rather than the purchase being for a rental and approved the file.

Not every situation can be explained to the satisfaction of an underwriter, so if the decision doesn't break your way, expect 25% down minimum and a .25% push higher in the interest rate as an investment property loan compared to owner occupied loan terms. Don't fret it because once established firmly that the occupancy is a primary residence, it's possible to refinance.

Without some measure of rental property management history, sufficient equity in your current property, and significant cash reserves for both homes, it can be hard to get these loans approved. Debt to income ratios are the same - 43-45% depending on the mortgage type. Don't believe the ratio data on any lenders website. They have to put something there as a guideline, but every purchase loan has it's own story.

My .02c
 
You must log in or register to reply here.
Back
Top