Questions about buying a 3rd house (insurance, loan, interest rate, property tax)

[Teepe]

Hi all,

Recently my wife and I saw a house that we really like. The problem is that we already have 2 mortgages on my name (current 2 properties are duplexes and I rent out 3 units while living in one). Wife does not have any mortgages on her name but she is still a student with part time job. We are young couple are there any programs that will qualify us for the third home?

Here are current situation:

My income: $92,500/ year
Mortgage A: $1,712 @ 15 years
Rental:
Unit 1: $1,060
Unit 2: $1,200
Mortgage B: $2,464 @ 30 years
Rental:
Unit 1: $1,400
Unit 2: current residence
All my tenants have yearly lease and we want to buy our third house as the primary home... where we don't have to be next to our tenants. They are not bad it's just we dont want to be too close.

The new home that we are looking at currently, the asking price is $448,000 and assuming that we will buy it at that price. Annual property tax is 2.4%. Home insurance $1k. Also, it's almost 6 acres and I will be raising some cattles to get the agr exemption so the property tax might be cheaper after that. However, let's assume that we will have nothing and pay full property tax price.

I don't have much down payment for the conventional loan @ 20% down. I have enough from 5% - 10%.

I am thinking about cash out refi my first mortgage as I bought the property at $200k and the average price now for a similar one is at $300k. I got the interest rate for this home at 4% and I heard that interest goes up lately so I am not sure what to do.

What do you think? Any suggestions will be appreciated

Sincerely,
Teepe

[RoamingTX]

How long have you owned the rental units, and do you have the income from those documented?

What other debt payments are there?

Honestly, it can probably be done, but it feels super sketchy.

[SmartMoney]

Unless you acquired the current properties just this year, tax returns are needed to calculate rental income. We also need the proposed rent for the new rental (former residence). I also think you will be able to do it, but tax returns are needed.

Is the property you are considering a working farm? While agr properties may get you a tax break, it could also limit financing. There must be different foreclosure regulations because many lenders run from them, and quickly. If there's cattle on the property now, some (non agr) lenders would request an affidavit as to your intentions. If you plan to dabble, then refer to it as a hobby farm, not to be a main source of income. Ask about the lender's requirement before sharing your plans.

[Teepe]

Originally Posted by RoamingTX

How long have you owned the rental units, and do you have the income from those documented?

What other debt payments are there?

Honestly, it can probably be done, but it feels super sketchy.

The first mortgage I have for about 2 years and income are reported to the IRS. I only have one car loan which i am paying for $336 per month. Yeah I might need to save more for the down payment. Thanks for the answer a

Originally Posted by SmartMoney

Unless you acquired the current properties just this year, tax returns are needed to calculate rental income. We also need the proposed rent for the new rental (former residence). I also think you will be able to do it, but tax returns are needed.

Is the property you are considering a working farm? While agr properties may get you a tax break, it could also limit financing. There must be different foreclosure regulations because many lenders run from them, and quickly. If there's cattle on the property now, some (non agr) lenders would request an affidavit as to your intentions. If you plan to dabble, then refer to it as a hobby farm, not to be a main source of income. Ask about the lender's requirement before sharing your plans.

I am not sure if the property is currently a working farm. But i saw two horses, 3 cows with a chicken coup. I will definitely ask them about their agr tax but gotta figure out if I will qualify for a loan or not. Thanks for the tip on "hobby farm" I am gonna read more about this as I am definitely doing it as hobby.

[RoamingTX]

Originally Posted by Teepe

The first mortgage I have for about 2 years and income are reported to the IRS. I only have one car loan which i am paying for $336 per month. Yeah I might need to save more for the down payment. Thanks for the answer a


I am not sure if the property is currently a working farm. But i saw two horses, 3 cows with a chicken coup. I will definitely ask them about their agr tax but gotta figure out if I will qualify for a loan or not. Thanks for the tip on "hobby farm" I am gonna read more about this as I am definitely doing it as hobby.

Save up more, or wait for appreciation to hit the point that you can leverage a single property to pay for another. Generally speaking, 3 years of rental income will give you the right handle on this.