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Location: Sometimes Maryland, sometimes NoVA. Depends on the day of the week
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I'm looking at a job that would turn me into a super commuter. I'm thinking I'd rather buy a small condo in the city so I could spend weeknights there when needed. Would count as owner occupied for mortgage purposes, even though it wouldn't be a primary residence? Would it make a difference if I got a 2 bedroom and rented one bedroom out (in hopes of covering part of the mortgage)? Judging my wee bit of research in the rental market, room rent would cover 2/3 of the mortgage. Income and credit scores should not be a problem for qualifying, especially not at owner occupied vs investment rates.
The problem is bigger than just the rate you'd have, the whole cost structure is not going to look good to a lender. Basically even if you were looking at a vacation property IN THESE MARKET CONDITIONS you would need to have ALL the costs covered on your own with NO rental income to really qualify for a mortgage.
If you can do this and you feel OK about taking on the debt then go right ahead, but DO NOT try and scam the lender -- if they determine that you are renting the place out they may not be happy! Further your insurance carrier may have problems with renting a place out.
It gets tricky when you "share" the place, but basically every homeowner's insurance policy I have seen has some fine print about "notification in the event you choose to take-in borders, tenants, or other unrelated residents for hire"...
They won't count room rent in the DTI ratios. Frankly I wouldn't mention the intention of renting the second room, as it won't help but could harm.
My guess is that they would write this as a second home. Second home generally gives a slight bump in the rate and requires 10% down of your own funds. Once you close they don't care if you are renting a room. My homeowners doesn't say you ahve to notify them if you get a roommate, but it does state that only those listed on the policy are covered as insureds.
It's actually not all that unusual for people in major cities to own primary residences outside of the city and a small condo or coop in the city. Loan officers and underwriters in places like NY, Boston, and Chicago see this quite often.
Location: Sometimes Maryland, sometimes NoVA. Depends on the day of the week
1,501 posts, read 11,750,050 times
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Quote:
Originally Posted by annerk
They won't count room rent in the DTI ratios. Frankly I wouldn't mention the intention of renting the second room, as it won't help but could harm.
My guess is that they would write this as a second home. Second home generally gives a slight bump in the rate and requires 10% down of your own funds. Once you close they don't care if you are renting a room. My homeowners doesn't say you ahve to notify them if you get a roommate, but it does state that only those listed on the policy are covered as insureds.
It's actually not all that unusual for people in major cities to own primary residences outside of the city and a small condo or coop in the city. Loan officers and underwriters in places like NY, Boston, and Chicago see this quite often.
Thanks! Its good to hear its reasonably common. Although I didn't say it specifically, the price I am thinking would not be a problem to carry all on my own (but that price may only get me a one-bedroom), and I easily have 10-20% down to put down + closing costs. The two bedroom example was just carrying it a step further.
Location: Sometimes Maryland, sometimes NoVA. Depends on the day of the week
1,501 posts, read 11,750,050 times
Reputation: 1135
Ug, so I am thinking I have no chance at qualifying for a mortage From research I have done, its not looking positive,
* The area I am looking at for condos is 86 miles from my current home. New job location would be 73 miles. In talking with my banker friend, he said 100 miles in the cut off for second homes and expect it to be even more strict these days.
* Although I could do 20% down, given most of what I am considering I would prefer to stick to 10% down to leave myself some liquid cash reserves. But all I read/hear is 20% down, no PMI available these days, or you have to go FHA. And thats for primary homes, not even second homes.
Rough estimates, based on various online tools, show that based on my current mortage payment (our only debt) and income, we could still afford a mortgage in the $350-450k range on top of our current mortgage. I was thinking something in the $100-150k range. The PITI on this would be less than we current put into our "fun" savings account a month (after retirement and other savings). I haven't talked to anyone yet b/c I didn't want my credit pulled until I was sure, but I'm not so sure its going to be worth it.
I think your friend is incorrect. It might not fly for desktop underwriting, but once an actual underwriter looked at it, and with a letter of explanation, it makes sense.
Now I don't know about the downpayment/pmi issue, that could be a sticking point.
If you want truly individual attention from an underwriter, a good idea would be to go to a local bank or a local credit union. Because they're local, there is often a bit more flexibility when it comes to "exceptions" during the underwriting process.
You may or may not get the most competitive interest rate, but reaching your goal is probably of primary importance
BTW, yes, PMI is getting tougher to get, but if you have the 20% that won't be an issue.
My husband and I have an offer accepted by Fannie Mae's Homepath Firstlook Program as long as we say it is our primary residence. Their website does not use the words "primary residence" for this program. Instead it says, "owner occupied." I have been living in a rental apartment in FL with our children for almost a year, and my husband's job is based in NJ where he lives some of the time in a house we have with a mortgage due to needing to be at his company's office there some of the time. He telecommutes most of the time and visits us for two weeks at a time. Our mortgage broker said we could not call the property we want to buy in FL our primary residence even though the children and I live here, because my husband's income comes from NJ, and our expenses are paid from his job. He said we had to have 10% down because it would be considered a second home by banks. The first look program specifically excludes investors until after the property is on the market 15 days. We have no plans to use the property for investment. We offered 10% down as our broker told us to do. We cannot find any reference to second homes that are owner occupied on the Fannie Mae website. We only have 24 hours to reply to the offer, and it is the weekend. the property would be owner occupied, and I would consider it my primary residence, but I don't know how to answer the offer.
Ug, so I am thinking I have no chance at qualifying for a mortage From research I have done, its not looking positive,
* The area I am looking at for condos is 86 miles from my current home. New job location would be 73 miles. In talking with my banker friend, he said 100 miles in the cut off for second homes and expect it to be even more strict these days.
* Although I could do 20% down, given most of what I am considering I would prefer to stick to 10% down to leave myself some liquid cash reserves. But all I read/hear is 20% down, no PMI available these days, or you have to go FHA. And thats for primary homes, not even second homes.
Rough estimates, based on various online tools, show that based on my current mortage payment (our only debt) and income, we could still afford a mortgage in the $350-450k range on top of our current mortgage. I was thinking something in the $100-150k range. The PITI on this would be less than we current put into our "fun" savings account a month (after retirement and other savings). I haven't talked to anyone yet b/c I didn't want my credit pulled until I was sure, but I'm not so sure its going to be worth it.
Definitely look around regarding the second home. Fannie's requirements for a second home are:
Must be located a reasonable distance away from the borrower's principal residence.
Must be occupied by the borrower for some portion of the year.
Must be suitable for year-round occupancy
The borrower must have exclusive control of the property.
Must not be a rental property or a timeshare arrangement.
Cannot be subject to any agreements that give a management firm control over the occupancy of the property.
Many lenders and investors have overlays, but Fannie Mae Direct is available with many banks, but there is no specific mileage requirement. The beauty of Fannie Direct is there are no overlays, it must just pass a reasonable test. Even better, you should consider an 80/10/10. When buying a condo, PMI is a challenge with a second home. Solution - avoid PMI.
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From research I have done, its not looking positive,
