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Terms for purchasing a second house?

1,139 Views | 3 Replies | Last: 7 yr ago by Jay@AgsReward.com
aglaohfour
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AG
This may be a really dumb question, but I'm curious and not ready to discuss with a lender just yet.

This is our situation: we own our home outright (paid it off late last year) and we're considering buying a rental property. I understand that an investment property mortgage typically requires a 20% down payment. But I'm wondering if since we don't have another mortgage (and zero debt, period), we could get away with a 10% down payment? What other terms would be typical under these circumstances? And how would that scenario change if we were to make the new property our primary residence and rent the home we're currently in?

Thanks in advance for any and all answers!
SteveBott
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AG
Your house being paid off has nothing to do with a purchase. New transaction will stand on its own Merritt although it will be easier to qualify for the purchase without carrying an existing loan.

Jay the sponsor offers two lien option to get down to 15% down, I have it too, but my second lien is expensive. No idea what his is.

So in general 20% minimum and 25% is much better.

If buy as primary residence it will have much better terms. That is a good option and rent the old one is fine.
jja79
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AG
Do a cash out on your existing home and you may be able to buy the rental with none of your own cash.
aglaohfour
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AG
Thanks. That pretty much confirms what I'd figured or for myself, but I was wondering if I'd overlooked something. We have some decisions to make, but fortunately we aren't in a rush.
Jay@AgsReward.com
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AG
You can get a 90% loan for an investment property but as it will be a portfolio loan (in other words, not a conventional loan) the rates will be quite a higher then you could get on the blended rate with 15% down. The amount of equity does not really have anything to do with if you can qualify for this (or any other program)

But, a good point is made above in that maybe you could use your current equity to buy the house outright if you have enough. Mortgages on owner occupied homes are always going to be cheaper then on investment properties no matter the program or down payment.
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