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Yes I know there is about 1 billion variables to this answer. Here's my situation so based off that, what are my chances at getting one?
I currently have a home loan of 142k (30yr) at 960/month. My wife has perfect credit and mine is mid 600's (house is only in my name). But I'm in the process of paying off credit cards thus taking off 414/month on this dumb debt I put myself in. I want to get a vacation home in the Cloudcroft/Ruidoso, NM area. I plan on spending around 90k for the home. Property taxes on a home in NM at this price is below 1k/yr so I'm thinking my payment will be around 500/month if not cheaper including taxes. My boss owns a home in Cloudcroft and his utilities are under 100/month.
With the credit card debit paid off, the only recurring debt we'll have is our current home and two cars. Which together cost 2,000/month but I might sell my car if I need to and just pay cash for one to help if need be.
Our gross monthly income is 7,700/month. I have no kids and no health problems.
From 0 to 100 (100 being getting it), what are my chances of getting a 2nd home loan for a vacation home. And will 20% down be required?
With credit in the mid 600's 20% down will be required. Everything else about this looks good- no reason you won't get approved based on this limited info.
Vacation/Rental homes have a little tighter criteria than Primary residences, so your info will be a little more analyzed than if it was a 1st Purchase. With that being said, from everything you've said you should be able to find a lender without too much difficulty. It will more than likely have to be a Broker rather than a Direct Lender (bofa, wells, etc) because of the score in the 600's, but you can make it happen with some shopping around.
Just a side note for you. I would be less concerned with the credit score, and more concerned with your Bureau Report and the why's behind the 600. Don't fall in love with the score, your credit history is way more important to an UW.
Last edited by JLay36; 04-24-2010 at 06:56 AM..
Reason: grammer..ugh
Since you were already living beyond your means ( in the process of paying off credit cards) where is your downpayment gonna come from ?
It sounds like the down payment is gonna be your toughest hurdle to overcome.
Living beyond my means? Do you know me? As of right now I pay 2,414 in recurring debt and gross 7,700/month. How is that exactly living beyond my means?
I can come up with a down payment but it might take a year to do it.
And my 650 credit score is because I closed 2 credit cards because I didn't use them and they were costing me money just having them. And it doesn't help that I had an electricity bill from a previous address I knew nothing about till I pulled my credit report.
Yes I know what I put and I didn't put dreams. I didn't ask for your financial advice. And I am not living beyond my means. I spent my cash money on dumb things. I had that debt on credit cards for a few years only paying the min. payment. Everything else I pay cash for and alot of that cash went into my car, house and etc. I'm not broke to say the least. And plan on paying off my credit card debt in a years time. Grossing 7,700/month and having a mortgage of 960/month is way below the norm. I honestly doubt most people are that low.
I think one of the key factors is your "payment ratio." Lenders don't like more than 28% of income going to house payments including tax and insurance, or 36% to total debt payments. (Maybe a loan officer can pin these percentages down more accurately than I can.) On $7700, that makes $2156 for housing (including the 2nd home) and $2772 for total payments including housing. Looks to me like you are pretty close. Like many people, financing two late model cars has maybe limited your flexibility a little--you'd be in great shape if your car payments were half what they actually are. Good luck!
I went through this arithmetic not long ago myself, and got financing on a second home as if it were my primary dwelling--80% loan, 30 year fixed, 5.125%.
A bit harsh with Danieloneil, don't you think? It sounds like he is certainly working to maintain a lifestyle within his means and budget for a future real estate investment. I guess you have zero credit card debt, no car loan, no mortgage etc. The guy certainly doesn't sound like a dead beat, it wasn't like he was paying his credit cards late, in fact he was trying to become debt free completely to afford a real estate investment. It is rude and unnecessary to make judgmental remarks as that he is living out of his means. Obviously, from his own words he was paying down debt, there was no need to be condescending.
A few things to remember and plan for on a vacation home,
Probably will have HOA fees
Utilities (water, electricity, cable, internet, etc,)
Maintenance
Taxes, and they will be higher as you cannot claim homestead
Insurance
Furnishings, it is unbelievable all the stuff you need to furnish a place from scratch.
So long story short, there is much more to owning a vacation home than just the payment. Our small one between HOA fees, utilities, taxes, and insurance cost us averaged out around $1,000 a month not counting anything else.
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