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Old 05-13-2008, 06:20 PM
 
Location: Lots of sun and palm trees with occasional hurricane :)
8,293 posts, read 15,266,376 times
Reputation: 7016

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Hello....

I have a home with a mortgage. There's a neighbor's house coming up for foreclosure and right now the asking price is the amount owed. I might be interested in that neighbor's house for myself.

What do you need to be able to carry two mortages? One of the houses would be rented if and until it is sold.

Would it make sense to refi my house and pull cash for down payment and other costs and end up with basically 2 mortgages of over $200K each -one will be rented or sold so this is "probably" a temporary situation.

Will the bank require that I have a tenant and a lease in place first?

Would it help if my bf buys my current house so I can get the other house? My bf wouldn't qualify by himself though, even through FHA I think, because I won't sell it cheap We would still need my income on both houses.

I have over 800 credit score and basically no debt other than the mortgage.

Any advice on investing? Strategy? What should I do first? H E L P
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Old 05-13-2008, 06:35 PM
 
Location: Durham, NC
426 posts, read 1,362,911 times
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I went through this thought process myself just recently. I was thinking about keeping our current house and refinancing to cash out some equity, renting it out and buying new.

My broker suggested that I refinance prior to doing anything on the new house, else the rental would be an investment and would get a higher rate.

That said, depending on the CMA on my current house, I decided against going this route. I could rent the house out and make about $100-150/month after my mortgage payment. I thought that would be a good idea, but then I realized that my new mortgage would be that much more because I didn't make as large a down payment as I could have had I sold the house.

Best case scenario would be that I'd break even on the mortgages and worst case I'd be paying more out of pocket than I'm gaining in equity on the rental. Combine that with the reseting of my amortization because of the refi, it just doesn't make sense (as long as I get a favorable CMA and it looks like my current house will sell).

There's always the potential that my current house could appreciate but I don't know that I'm willing to gamble on that with such definite "no upside" on the mortgages question.
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Old 05-13-2008, 06:54 PM
 
Location: Lots of sun and palm trees with occasional hurricane :)
8,293 posts, read 15,266,376 times
Reputation: 7016
You are saying that you just kept the first home and did nothing about a 2nd?

I'm tempted to really low ball the offer on the 2nd house and take my chances. My current mortgage is not that high because I did put 20% and it does have enough equity to pull for the 2nd house but taxes and homeowner's are outrageous and those are the ones that scare me. I'm in Miami, FL and homeowners here is ridiculously high.

I don't know if I could sell my house down the line - I suppose eventually I would if I priced it low enough but I'm not really willing to risk everything I've worked for for so long.

Rent on my house would cover mortgage, insurance and taxes and I would have to take care of the 2nd house 100% myself, which is ok. I'm just totally ignorant about how to start this process and what I'd be up against to start. I'm the kind that likes to have all my ducks in a solid row and nobody moves!
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Old 05-13-2008, 08:15 PM
 
Location: Durham, NC
426 posts, read 1,362,911 times
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I haven't done anything just yet. Still waiting on an estimate on the first house to see what our options are.

My situation is very similar to yours. We put 20% down and probably have something like 35% equity. Work the numbers out though, and you'll find that if you pull equity out, you're going to be raising your mortgage by the same amount on the rental as you're reducing it on the new home.
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Old 05-15-2008, 10:50 AM
 
3,698 posts, read 10,618,752 times
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So you'd risk your primary home to speculate?
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Old 05-15-2008, 11:22 AM
 
Location: Tulsa, OK
5,988 posts, read 10,745,702 times
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Never borrow money for a down payment.
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Old 05-15-2008, 12:12 PM
 
Location: Lots of sun and palm trees with occasional hurricane :)
8,293 posts, read 15,266,376 times
Reputation: 7016
I just got back from talking with a lender (through my credit union).
According to the numbers I could keep my house and buy the other but I don't like the results because it would be minimum down payment (10%) and then I'd have PMI.

The other option, refinance my house and take out enough for 20% + closing + a couple of thousand extra.

I could rent my first house for almost enough to cover its mortgage, taxes and insurance. I'd have to subsidize about $200/mth but it would allow me to not pay PMI on the 2nd house and I'd keep both properties.

I'll have to really think about this and scrutinize the other house from all angles. Eventually the current house would go for sale anyway but I really don't want to feel like I'll be choking if anything goes wrong (eviction, not rented for even a month, etc.)

Last edited by vpcats; 05-15-2008 at 12:12 PM.. Reason: typo
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Old 05-15-2008, 12:15 PM
 
Location: Lots of sun and palm trees with occasional hurricane :)
8,293 posts, read 15,266,376 times
Reputation: 7016
Quote:
Originally Posted by studedude View Post
Never borrow money for a down payment.
It depends where you are borrowing from. I did that for my first house. Borrowed against my annuity (403b) which is like a 401K but for non-profit institutions. I pay myself back so my funds will be there when I need them. In case of catastrophe, it's only myself that gets screwed if I decide to default or can't pay it off. It also becomes taxable income + penalty so you know you want to pay back. It's better than borrowing from a bank or a individual.
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Old 05-15-2008, 12:17 PM
 
5,014 posts, read 12,772,094 times
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Quote:
Originally Posted by studedude View Post
Never borrow money for a down payment.
Never say never.
There are pleny of situations that would warrant borrowing for a down payment.
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Old 05-15-2008, 12:54 PM
 
Location: Durham, NC
426 posts, read 1,362,911 times
Reputation: 176
Quote:
Originally Posted by vpcats View Post
I just got back from talking with a lender (through my credit union).
According to the numbers I could keep my house and buy the other but I don't like the results because it would be minimum down payment (10%) and then I'd have PMI.

The other option, refinance my house and take out enough for 20% + closing + a couple of thousand extra.

I could rent my first house for almost enough to cover its mortgage, taxes and insurance. I'd have to subsidize about $200/mth but it would allow me to not pay PMI on the 2nd house and I'd keep both properties.

I'll have to really think about this and scrutinize the other house from all angles. Eventually the current house would go for sale anyway but I really don't want to feel like I'll be choking if anything goes wrong (eviction, not rented for even a month, etc.)
Exactly the same situation I was (am) in. The clincher for me was the realization that keeping my current home and renting it out would cost me more than just the mortgage on it - I had to factor in either the increased payment on my new house because I've got money tied up in the old one or an increased payment on the old one because I borrowed on it.
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