How to purchase a second property as a primary residence

[Ling Rita]

Dear Investors,

I’m just staring out on my investment journey and I would like to hear your opinions on how to get qualified for a second mortgage as a primary residence.

I’m currently living in the property that I have purchased last year in the big island. I’m on the conventional loan. I have a steady income and good credit history. And I’m considering to purchase another property sometime next year in Honolulu as my primary residence and planning to rent out the current one that I’ve lived in. I’ve talked to my lender about this. She suggested that I will have to rent out the current one in order to get qualified for the second one as my primary residence. My question is: Is there another option for me? As I do not want to rent out my place yet and looking for rent another place while waiting for the loan to get approved. 

Any insight would be much appreciated, 

Ling

[Eric Jubeck]

It's always a good idea to speak with multiple lenders, which I would suggest to you.

I'm assuming your lender said you need to rent out your existing home because most likely your DTI won't qualify you for two mortgage simultaneously. But, which is why you should check with multiple lenders, the criteria to rent out doesn't necessarily mean you move out now. Most cases you can have a lease agreement in place for after you close on the new home, or the lender may go off market rent calculations for your existing home to determine how much of that existing mortgage payment can be removed from your DTI calculation when applying for the new loan. All of this can be done without you having to move out of your current home is the point...

As for doing second home loan, you have to factor in it will cost more because interest rates will be higher. You will also have to put more money down on the purchase vs a loan for primary residence if that's a concern to you or not. But, more importantly it sounds like you're planning to buy this second home near where you currently live. In most cases, you will not qualify for a second home/vacation home mortgage anyways with it being so close to your primary residence and it would have to be structured as an investment/rental property which would have even higher loan costs.

Point being, work with a lender that can help you navigate the renting out of your existing primary residence for after you close on the new home, and just go ahead and purchase the new home as a primary residence to save yourself trouble and more importantly money!