70% LTV on Property #1 to qualify for conventional on Property #2

[Matt Pich-Maxon]

We bought our primary residence 10/06/2017. We found a Duplex that we would like to buy and make into our new primary residence using a conventional loan.

I emailed a lender and she said I would need 70% LTV on our primary residence (soon to be rental) in order to qualify for a new owner-occupied loan?

Our DTI is 25%.

Anyone have experience with this? And/or can you recommend lenders for conventional loans that would not require this?

I know part of the answer will be to contact more mortgage brokers :)

Thanks,

[Joe Stretch]

@Matt Pitch-Maxon, 

Sounds like you are getting some different opinions, and all are valid.  The reason you are getting the different view points is because there are 2 sets of guidelines in play, in general.  One, is a Fannie Mae or Freddie Mac guideline (referred to as conventional or conforming, loosely the same thing), which is a baseline guideline to be able to sell those loans on the secondary market because they meet the GSE guideline, and then on top of that, the individual mortgage lenders may have their own set of guidelines that  go over the top of the base guidelines.  The individual lender guidelines are referred to as "over-lays" because they "lay over" the top of the base guideline.  These came about after 2008 when lenders were getting loan buy back requests left and right.  Each lender can have their own over-lay.  It's risk mitigation to each lender.

Here's a link to the Fannie Mae sellers guide and is indicative of the base guideline:

https://www.fanniemae.com/content/guide/selling/b3/3.1/08.html

The 70% LTV you were quoted as needed to have with your current home sounds like a lender over-lay that I mentioned above, its not required by all lenders.

Kerry's comment above is your true hurdle here, when trying to buy another house using owner occupied financing, you haven't lived in your current house for 12 months.  If you go back into your paperwork from when you bought the house last October, read through your note, the instrument that says you will pay back the loan, yadda, yadda....part of every note states that you agree to owner occupy the house for a period of no less than 12 months.  If you go to any lender at this point, there is a 99.9% chance they will decline the loan request or counter you to investment financing, which is more cost and more down payment.  If you buy another owner occupied house now, you are violating the note you signed last October.

Without being too wordy (I already am), once October comes and goes, there is also a subjective hurdle here and that is buying a duplex to live in when your current home is an SFR. Lenders wont typically buy that unless there is a concrete reason and or hardship which would make that move make sense like moving significantly closer to work, or taking in an aging parent, etc, etc...The reason for that is because in a typical scenario, people want to move out of a duplex and have more room in an SFR. When you are going the other way, the underwriter will raise an eyebrow and question motives. Many more thoughts, but will stop it here...Hope this is helpful.

@Jonathan Pflueger, thanks for thinking of me!