Morgage broker or Bank? (loan, real estate, credit, rate)

[trebein]

I purchased a home 8 months ago. However i am seeing a lot of deals out there. I'll like to get another home and rent this one out. I went to a mortgage broker and he said I'l be able to put 3-5% down provided I have lease to show my current home is rented. I asked my bank they sad i may have to put 20%. I'll really like to buy something now but I have only 5% right now. Is there any bank out there that will do the loan. I have a decent job and i don't have any other debt.

[aneftp]

Sorry to bust your bubble but you cannot buy another home with very little downpayment anymore. The lenders have really tighten their standards.

Read this article...it will also provide the link to the government website.

FHA limits 'buy and bail' purchases | Real Estate and Technology News for Agents, Brokers and Investors | Inman News

Too many people in the early part of the year were doing "buy and bail" methods where they purchase a new home while telling the banks they are going to rent out their old home. However, these people have every intention of defaulting on their original loan (maybe they were underwater and had no chance for recovery). So these homeowner produced rental lease agreements showing that they would have enough income to cover their old mortgage and they would still have income left to afford their new mortgages.

Once they closed on their new home, they just stopped paying the mortgage on their old home. They don't care if their credit is ruin because they had already locked into a mortgage on their newer cheaper house at a good rate and have gotten out of trouble with their previous home that was losing value (or probably underwater).

If you want two mortgages, you need to show the bank the you can afford 2 mortgages alone without any rental income counted. (this is unless you can show you have at least 30% equity in your old home).

I believe you still need to put 20% downpayment on the second homes with most banks now anyways. Maybe they will let you have a 10% downpayment on a second home if you can show them you have an average of 6 months of mortgage payments in reserve in your checking/savings account. You will need to show them your checking/savings/investment account from at least the last 6 months that shows you have had this money (there are red flags if they only see you have this money come out of the blue recently) It usually has to be an average balance.

[NJ987654]

aneftp is right. Buy and bail is a big problem right now. The fact that you probably have little equity in the home you are in and the fact that you've had it for a short period of time will both cause concern to a lender. You will need to show that you make enough money to pay both mortgages without relying on any rental income. Also, if you are buying in the same area, you will need to show your motivation for moving in such a short time.

It's not a bank vs broker rule... it's pretty much an industry standard right now.

[ShanetheMortgageMan]

I think you guys are jumping to conclusions here. You are right, buy & bail is a big problem, but I don't want to assume that is what trebein is planning on doing.

But first things first, trebein, you might not have realized, but you probably signed an Occupancy Affidavit within your loan documents that said you plan on living in your home for 1 year, and if you move out, would need to notify the lender. Look for this document and read it.. you do not want to violate the mortgage documents you signed by moving out, as then if the mortgage lender finds out they could call the mortgage note due and payable in full immediately, and refinancing an owner occupied home is a lot easier than a non-owner occupied home.

Now, let's assume that either you don't have that requirement or you are buying in 4 months from now. In order to buy the new home you will either have to qualify for both the new & old mortgage payment without any rental income, or if you've owned the home for 12 months and you have the required amount of equity (25% or 30% depending on the loan program) you can put a renter in before you buy your new home and can use that rental income to help offset your current homes mortgage payment. There are also portfolio lenders who do not have the equity requirement but I don't think it's likely they'll have 3-5% down payment options, and are pretty hard to find.

[NJ987654]

no one is assuming trebein is bailing... because of the buy and bails, lenders are stricter on the use of rental income to qualify.

good point about the occupancy affidavit. you get rep for that

[trebein]

Actually I plan on selling this house eary next year. Reason beign that i moved to a new state but can't seem to find any job here. I still have my old job and on maternity leave. I see so many good deals in my area and would like to get one before our move in june. I know we will not make any profit in this home now. I also know that there are a lot of buy and bail that went on. I am merely planning ahead assuming we don't find a buyer for our home by june. The bottom line is I must move back to be close to my job.

[NJ987654]

Once you've been in the home 12 months, you may find it easier