Financing a second property as a owner-occupant, Phoenix AZ

[Sekyu Kim]

Hi all,

I am looking for some input and guidance. 

About 2.5 years ago, I purchased a home (3bd 2bth) near downtown Phoenix and have been house hacking a guesthouse as a short term rental with good success. Recently our next door neighbor, whom we have grown to love as a friend passed away and we were presented with the opportunity to purchase his home and have it under contract. Prior to this (about 2 months ago), we had refinanced our home to take advantage of the low interest rates.

We are looking to purchase the new home with a 5% conventional owner-occupied financing. Our plan is to move into the home, and turn our current home into a full rental property. We were asked by our lender to complete a letter, stating our intent to occupy the new property as our primary residence, however, we just received the bad news that the underwriters are unable to justify the loan due to the following reasons:

1. The new home is about 100 sqft smaller than our current residence (although the new home has a 4th bedroom, which we would appreciate with two children living in our home)

2. The new home does not have a guesthouse

3. The new  home is not renovated, our current home had been renovated prior to purchasing

4. The new home is in close proximity to our current home (literally next door)

I am currently waiting to speak to another lender (for the same 5%, owner-occupant financing), however, I'm looking to find other means in case we end up with the same results. The new home really holds a sentimental value to us, and our neighbor's family has really become like our own, and we want to do everything we can to make this process fast and easy for them as well. 

I should add some details about my financial standing, I have a good solid W2 income, and have a solid savings account (not enough for 20% down, however), I have excellent credit. Prior to the rejection at underwriting, I was advised I would have no problems qualifying for the loan, financially. 

If you have any suggestions on lenders, banks, and other means of financing the property in Phoenix AZ, I would really appreciate your input.

Thank you!