HELP, trying to get a second investment property...

[Veronica Veiga]

Hiii, I currently own a duplex that I am house hacking, I have had the property for two years now, its an FHA loan at 2.7% therefore refinancing is not an option at this time. Bought my home for 640K worth 810K now, recently had it appraised.

I am looking to buy my next investment property, a fourplex to be more specific. I am looking at either a Conventional loan vs a DSCR loan, don't know if there are other loans I should be considering? I recently had a lender tell me that I would not qualify for a conventional loan due to DOI ratio has to be at 45% and currently I have no debt except for my current home. He stated that I would have to pay 300K to my current home to qualify, which I don't understand why that is. I am a travel nurse and I make good money but have only been doing it for a little over one year and half, but I also have a per diem job, I have been working for that hospital for 4 years now.

Also I would need 20-25% down which I don't have all of at this time. I could continue to work and save that amount which would take me another 1-1 1/2 years, wondering if anyone had any suggestions on other options to fund the down payment. Is there a way or a loan that would allow me to enroll the down payment into the loan? Would that even be a good idea? Thought about a HELOC but I am unsure if I would be able to obtain it and/or if it would generate what I need to cover down payment.

Looking for some clarification/guidance, feel so lost at the moment. Thanks in advanced. 

[Albert Bui]

Quote from @Veronica Veiga:

Hiii, I currently own a duplex that I am house hacking, I have had the property for two years now, its an FHA loan at 2.7% therefore refinancing is not an option at this time. Bought my home for 640K worth 810K now, recently had it appraised.

I am looking to buy my next investment property, a fourplex to be more specific. I am looking at either a Conventional loan vs a DSCR loan, don't know if there are other loans I should be considering? I recently had a lender tell me that I would not qualify for a conventional loan due to DOI ratio has to be at 45% and currently I have no debt except for my current home. He stated that I would have to pay 300K to my current home to qualify, which I don't understand why that is. I am a travel nurse and I make good money but have only been doing it for a little over one year and half, but I also have a per diem job, I have been working for that hospital for 4 years now.

Also I would need 20-25% down which I don't have all of at this time. I could continue to work and save that amount which would take me another 1-1 1/2 years, wondering if anyone had any suggestions on other options to fund the down payment. Is there a way or a loan that would allow me to enroll the down payment into the loan? Would that even be a good idea? Thought about a HELOC but I am unsure if I would be able to obtain it and/or if it would generate what I need to cover down payment.

Looking for some clarification/guidance, feel so lost at the moment. Thanks in advanced. 

 HI Veronica,

This situation hits home as many of the people we're working with are in this situation (current own with uber low FHA rate under 3%) and are looking to purchase new house hacks or rental properties.

With a conventional loan, if you're occupying, you can get a 1 unit SFR/condo as low as 5% down, 2 unit 15% down or less, and 3-4 unit with 20% down. The advantage of FHA is that you can go in with 3.5% down regardless of legal unit count (1-4 units), however on 3-4 unit FHA properties you will encounter the FHA self sufficiency rule or SS rule. This just means that 75% of the rents of all units (all 3 or all 4 of the units) must be equal to or greater than your entire monthly payment to ensure FHA will be sufficient should anything happen to your ability to pay for this property (if they take it back the property as a foreclosure/REO).

In more expensive west or east coast markets it will be hard to make the FHA SS rule right now given that the rates are in the 6-7% range so I would recommend targeting 1-2 unit FHA properties.

There is an exception to get a 2nd simultaneous FHA loan however you'll have to have one of these 4 situations to qualify along with 25% equity on your current property which it seems like you do (close enough):

1) larger family size (evidenced with medical pictures/documents for legal adoption/birth certificates)

2) You were a cosignor but not currently occupying a property of another FHA borrower and now you want to buy or qualify for your own FHA home loan

3) legally separate from an exspouse with which whom you shared a FHA loan together on a home and now you want to qualify for your own FHA home loan

4) you're relocating for a job (need employer offer letter signed/dated by employer or HR)

Your other issue with qualification is DTI and that is often true that its capped at 45% DTI or debt to income however you can also go up to 50 or 50.5% too so there might be some room to work towards there to get that additional borrowing ability.

Paying down your existing loan is probably the worst way to obtain more qualifying ability especially when your current note from FHA on your current property is at 2.70% as you mentioned. A key point to note, is that when you leave your current FHA home (we call this a "departing primary residence," in the lending world is that you'll be able to use rental income offset so long as you have long term leases for your home (whether its 1 lease or rent by the bed room long term leases, I've used both with FHA or conventional). This rental income offset will help you offset your current home which allows you to free up most or all of your income for that next purchase.

Hope that helps let me know if you had any other questions or would like to discuss some strategy or hypothetical mortgage planning scenarios let us know.

@Matthew Kwan@Carlos Valencia