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Does anyone know what the debt to income ratio is when applying for a 2nd mortgage? Also if our current house is for sale, do they take that into account?
I heard they would require 6 months of savings to cover both homes. We have that in our 401ks. Do they count 401ks?
Typically 45%. If your current home is for sale, they will still hold that payment against you, including taxes and insurance. You are accurate regarding reserves. They will use 60% of your vested 401k balance for reserves.
If the home is on the market, you are going to have a tough time finding someone to give a 2nd trust. A home for sale is a signal that cash is needed or someone is moving (hello, Captain Obvious). However, they are also signs someone is in financial trouble. This is how many came to realize their home was perhaps not worth what they thought it was when it was on the market and didn't sell.
If funds are needed, seek another secured source - 401K or secured against savings, or even family. These days, mortgages seem too easy to walk away from.
Same situation here. We put our house on the market to find a bigger house, just found dream house before any offers on ours. Got two banks to preapprove us for way more than needed with BOTH mortgages. Went for it and are approved with (easy) conditions and waiting for clear to close. Someone is interested in our house but no offers yet. Will add our current mortgage is very low and the new one isn't high either. Had to write a letter to explain why two houses right now. Very scared it will end up being a deal breaker but we've gotten this far!
We just did this. Our mortgage broker could have gone to 49% DTI. As for reserves you only need them for conventional, FHA you do not. And they will count 401k but only 60% as stated above. It was so easy, way easier than I would have thought. We are trying to rent this house out because its underwater, we had to move for my husbands job. I thought for sure getting a second mortgage would have been harder, due to fear of buy and bail, but it was nothing.
Murph76, can you shed some light on the final stages of your experience? We have approval with conditions, wrote a letter explaining the current house being for sale/rent. Do you think we are covered? How much more did the first house play into you getting to closing?
We wrote a short letter that said "as for our house here in Michigan, we will be renting it out". That was it. We had one round of conditions, and the house in michigan really played no part in getting the mortgage out of state, it was crazy simple. I was so worried about hangups, but it went off without a hitch.
We wrote a letter stating ours was for sale and if it doesn't sell we decided we would rent it then. So at no more questions. We were preapproved for the new mortgage at 170,000 but our new house will only be 120,000 so that played into it. And that preapproval was without selling or renting the current house.
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