Need Mortgage Advice Please! (insurance, home loan, interest rate, credit card)

[janelf58]

If I want to purchase a home near family in another state so that I could stay there the 8-10 weeks out of the year I visit, how will that be treated by a lender if I have the following situation:

Currently I'm on a mortgage loan with my sister for our current home- we've been living together for 30+ years. She recently lost her great-paying job, we put the house on the mkt, and got it sold in a few weeks thankfully. I am still working full time and don't intend to retire for a while or move out of this area (I'm retirement age). After our current home sale closes, my sister and I will move in with a close family friend nearby after we sell our home. We might split expenses, but it could be a no or a low- rent situation, and I will probably retire in a 4-5 yrs, then move to the home I'm trying to buy as a 2nd home. Since I would technically no longer own a primary residence after I sell my current home, will the lender allow me to do a loan as a "second home" loan? Or would they call it an "investment property" loan (higher int rates I'm told)? I have 800 credit, good money in savings/retirement accounts, and plan on putting enough down to where I'll only be borrowing about 50% of the sales price. Also, good income/debt %. Please help! thx

[Modification Specialist]

Originally Posted by janelf58

If I want to purchase a home near family in another state so that I could stay there the 8-10 weeks out of the year I visit, how will that be treated by a lender if I have the following situation:

Currently I'm on a mortgage loan with my sister for our current home- we've been living together for 30+ years. She recently lost her great-paying job, we put the house on the mkt, and got it sold in a few weeks thankfully. I am still working full time and don't intend to retire for a while or move out of this area (I'm retirement age). After our current home sale closes, my sister and I will move in with a close family friend nearby after we sell our home. We might split expenses, but it could be a no or a low- rent situation, and I will probably retire in a 4-5 yrs, then move to the home I'm trying to buy as a 2nd home. Since I would technically no longer own a primary residence after I sell my current home, will the lender allow me to do a loan as a "second home" loan? Or would they call it an "investment property" loan (higher int rates I'm told)? I have 800 credit, good money in savings/retirement accounts, and plan on putting enough down to where I'll only be borrowing about 50% of the sales price. Also, good income/debt %. Please help! thx

4 to 5 years into the future - if I had a crystal ball to see whats going to happen in the next few years, I would be the riches person in the world....

When dealing with a lender, you need to be careful on how and what you say to them. Being quiet and brief on the information you give them, can benefit you. To much information disclosed, can result in a higher payment. On simple terms - what is an interest rate, it is a risk level the lender charges you for giving you a loan.



800+ credit score - good
50% down payment - good LTV
Selling existing home - renting for 4 to 5 years...... - flag"



For a property to be considered a vacation home (defined by the IRS), you need to stay there for at least 14 days a year, less than that the home could be considered an investment property. I think you got that covered by staying there 8 to 10 weeks a year.

You could discuss with your lender about living in an apartment as your primary residence. The home your looking to buy will be used as a vacation home. In doing so you stand a good chance of getting a higher interest rate on your new loan. Meaning you could pay more, because you told them the property is a vacation home.

You just sold your old home and are going to be renting. When you are ready to buy your next home - this could be easily understood as you have been renting and are now looking to buy a new primary home. Why not say the new home is going to be your next primary residence. Doing it this way can result in a lower interest rate. Resulting in a lower payment.

Look at it this way - keeping your current home, and buying the second home. Due to title and country records, credit reports, etc, it could be easily questioned by an Underwriter, resulting in a higher interest because it's a vacation home.

Being that you no longer physically own a home, showing you are looking to buy and only show ownership in one home only, it is very believable. Do you want to pay a high payment, or do you prefer a lower payment?

After you close on the new loan, who cares on how much time you will be spending there?


- - -


One thing I want to mention - there is a problem that comes up for mature borrowers with their credit.

You pay everything off on time, resulting in a 800+ FICA score, the higher the score goes, the more soft it gets (like jello). You are not going to show any recent transactions for payments on installment debt.

With no activity, your high score becomes a "N/A rating". Then you have to start all over again rebuilding your credit. I have seen many times, and it can happen in as little as six months.

In four years - even if you get some credit cards and pay of them to keep your credit alive, you are not going to have any recent activity of mortgage payments. When you go to qualify for your loan, it will be asked for you to supply a record of your rental payments.

From your posting it seems like you are a reasonable, responsible mature man. At your age you need to make the right choices and can not afford any mistakes. You need to make the right choices to guaranty your future. It is my opinion I would not to wait 4 to 5 years to buy your property.

Why? For the credit problems I mentioned above, but also you will get a better deal now then if you wait a few years. The prices on houses are the lowest they have been in years. Interest rates are low now and will remain low for the foreseeable short term future. As the ecomomy gets better, the value (prices) on homes go up, and the interest rates rise.

You mentioned you are working - right now you can show income through your job. Once you retire, your will be on a fixed income. When qualifying for you new loan, having a low DTI score will result in a lower interest rate. Having a high DTI score will result in a higher interest rate.

I wrote loans for many years, I cannot count how many individuals that I repaired their credit to qualify to for a home loans. One small piece of advice I could give you. Think where you are now, and think where will you be in the future. "What you do today, will make the person you become tomorrow".

I hope I gave you a few things to think about

Good Luck....

.

[FalconheadWest]

It's probably not the smartest thing to post about how to commit mortgage fraud in an open forum. It's fraud to say you're buying a primary residence when you have no intentions of making it your primary residence...

[chet everett]

For mortgage purposes, when the OP is not using the property near family, who will be?

The lender ( and insurers) will probably be OK if the OP has family members living in the house for the other 40 weeks or so of the year. If it is rented out to third parties it is probably more accurate to consider this an income property.

If it just sits vacant then it is probably more accurate a vacation home.

Lowest rates for mortgage and insurance are for primary residence, the situation that the OP seems to be moving toward is not particularly common. This is not really a case where there is a blatant attempt to generate income or hide the vacation home status, those would be clearly fraudulent. Risk of default in such cases would skyrocket. The. OP seems to have no intention of that, with large equity stake (50%) it would be madness to let the payments get behind. Insurer would be more exposed if the place went vacant for long periods OR if renters were using it...

[Modification Specialist]

Originally Posted by FalconheadWest

It's probably not the smartest thing to post about how to commit mortgage fraud in an open forum. It's fraud to say you're buying a primary residence when you have no intentions of making it your primary residence...

Point - yes I understand mortgage fraud is, our office does Forensic audits. Per Chets post - agree this is not really the case where there is a blatant attempt to generate income or hide the vacation home status, this would be clearly fraudulent. When I speak to people analyzing their situation - I am looking to either to helping them to spend less, help them save more, or help them plan for the future to better themselves.

Who can say in the future - he is going to buy the property as is primary because he wants to live close to his family. What if he wants to stay their permanently. While his sister continues renting out their apartment?

Since your down in the Lone Star state - an example could be a person in their late 50's living in Waco, sold their home so they could be closer to work. They sell their home and move into an apartment in Garland, commuting into Dallas for work. Thinking of retiring in a few years. Find to buy a house in Austin over looking Lake Travis. What is there to hold them back as buying this as a primary home?

So they buy the house in Austin as their primary, move in and then 8 to 10 weeks later their old company in Dallas wants to hire back them as a consultant.

Are they going to contact their lender to tell them they are not going to be living there anymore so they can be charge more money? Not!!!

This is not the case - he is retiring and living on a fixed income, plus he is not going to have any other property. His best situation is the look for ways to lower his payments. He has an opportunity where all his cards in the right stacking order, this could work out so he is the one that will be benefiting with a lower payment.

Again nobody can look into a crystal ball and tell you what is yet to come.....

.

[sigep739]

Go in and talk to a Mortgage Broker. This is not a unique circumstance - especially for people looking to retire. If you have "skin" in the game (i.e. 50%), you're not going to have a problem.

The best thing to do is be honest... you have have to write a letter on your situation and ask the broker to include it in the file... but by not telling the truth (or ommitting it), you are in a fraudulent situation - and I know that's not where you want to be.

Talk to a professional.

[chet everett]

Originally Posted by sigep739

Go in and talk to a Mortgage Broker. This is not a unique circumstance - especially for people looking to retire. If you have "skin" in the game (i.e. 50%), you're not going to have a problem.

The best thing to do is be honest... you have have to write a letter on your situation and ask the broker to include it in the file... but by not telling the truth (or ommitting it), you are in a fraudulent situation - and I know that's not where you want to be.

Talk to a professional.

Reaaaaaally there is no "crime" for " omission" when the "facts" are not the central issue. There have been lots of borrowers that did blatantly defraud lenders as to their intent / status of occupancy an the OP really is not in that situation at all.

If they go into any lender and overwhelm with unneccesssary info they very likely will not get the service / loan that is most apporpriate for their needs and it seems clear that there is enough uncertainty for their situation (as their intent is not do any of this for several years...) that it would be foolish to go try and borrow now...

They need to be aware of the steps to keep their credit in a healthy / active state and have a valid plan for acquiring the property down the road, but going over the hypotheticals now is less about "fraud" than prudent awareness of how "too much info" will not serve them well.

[sigep739]

Uhhh... your usage and occupancy IS most definitely a central issue.

Besides, a broker - who is a professional - will be able to tell the OP what to do. In many states - there is a fiduciary there.

Anyway, this is definitely a central issue and if I was originating a loan, this is something I'd want to know. If I was funding the loan, I'd want to know this as well. Imagine the circumstance in which the loan has to be bought back?

Best to talk to you mortgage professional and dont rely on this forum.