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Updated about 8 years ago, 11/02/2016
First house the hardest?? Obtaining second property question
I am confused on the process of obtaining a second property and am hoping some of you wonderful people could help make sure I am thinking about this correctly
I bought a 3B 2.5BR single family house about 2 years ago and have been living in it. I have experience renting out one room.
My goal is to purchase a second single family house. So my first house would be a rental. I would live in the second house.
For easy numbers let’s say house 1, the current house I living costs $300k and I put down 20%. House is worth between $350k-$375k thanks to a strong Seattle housing market. Once I finish a few upgrades it should be worth a little more.
My plan would be to find a second house around $300k and put down 20%.
Because I am poor I would need to count on the rental income of the first house or I will qualify for a very small loan since my debt to income would be too high. I spoke with my current lender and they said that they only count 75% of the income I have taken in from rent. I understand this 75%. But I have only rented out one room of the house, which is obviously much less than if I rented out the whole house.
Current mortgage payment on the first house is ~$1500/month and conservatively I can rent out the whole house for $1900/month. But since I have only rented out one room at $600/month, the bank will only look at $600/month x 75% or $450/month. What a scam! Am I really supposed to rent out the whole house for max rent just to show a history? This is absurd to me, but I will live in a tent for a year if I have too.
My questions are:
How do I get the bank to take into consideration the FULL rent I would receive if rented out the whole house, not just a room? I understand if they can only count 75% of an estimated rent.
Is there anything I am just completely not understanding or have missed?
What strategies have you used to purchase a second property?
Am I going about this the right way?
I thought the first house was supposed to be the hardest!! Advice and sage wisdom is greatly appreciated.
Thanks,
Jordan