buying another primary residence

[Raky Patel]

hi all, this is my first post here but i have been lurking for a couple months now. i must say this is a great resource and thanks to all that share their experiences. i have some questions regarding buying another primary residence. here are some facts about my situation:

- I just got married last October and my wife and I each had our own house.
- I have a home in my name that has been rented out (less than a year) and live in my wife's house.
- The plan is to rent out my wife's house and buy a new primary residence leaving us with two rentals.
- We do not want to pull out any equity from either house and each has a rate lower than 4.5%.
- This is the first house we would be buying with joint ownership.
- Our debt to income ratio is around 35% if you factor in both of our mortgages.

Questions:
1. How do mortgage lenders look at this situation? I assume they will not count any rental income that has been received as the properties would not have been rented for 2 years however would the mortgage still effect my debt ratio if I was breaking even from the rental (I am making an annualized return of around 10%)?

2. I have read that you must have the equivalent of 6 months rent in reserves (not a problem) when looking for a new property if you are keeping one as a rental and it has not been rented for 2 years. Does this mean that this property would not be that heavily considered when determining whether or not we can get another mortgage?

3. Do the funds in question 2 have to be in a savings account or can they just be in an investment account or retirement account?

4. How much down can we expect to be required to put down if this was our 3rd mortgage and we were going conventional - 10% or 20%? Also, what percent of our income can we expect to be qualified for in monthly payments given the facts above?

Thanks,
Raky

[David Krulac]

Raky Patel

I have another angle for you.

1. You both have mortgages on your individual former residences, these mortgages are in your individual names.

2. FNMA & Freddie and all the overlays will limit you to either 4 mortgages or maybe 4+1 mortgages.

3. If your to be acquired new residence is owned and mortgages in BOTH of you names, it will mean that you and your wife will both have 2 mortgages, even though the total is only 3. (Wierd math 2 + 2 = 3) But that's how Fannie etc. work.

4. If your long range plan is to buy other real estate after the new residence, then you might want to consider getting the new mrtgage in only one name.

5. Given current rules you and your spouse can acquire 8 different properties if each is only mortgaged in a single name versus joint names.

6. Back in the day, like 5 years ago, the FNMA limit was 10 mortgages and spouces could then potentially acquire 20 properties all will FNMA conforming mortgages, oh those were the days!