My husband and I just purchased our first house in May 2010. We took a loan out for 45k less than we were approved for. I have come across a rental property (4 unit) that I am interested in purchasing..
Can I get another mortgage this fast? We have good credit, and have no debt besides the house.
Thanks!
For residential income property, the minimum cash down payment is usually 30-35%. No substantial cash = no mortgage, no buy. Plus closing costs, of course. Interest rates on non-owner occupied and investment properties are higher than for owner-occupied. Ditto on the insurances.
If you have the cash for down, closing costs, reserves, and the income and credit, and if the purchase won’t push up your debt ratios too high (as the lender defines "too high!"), you just might be able to do this. Run the numbers! Do a spread sheet on the property, estimating conditions of a 10% vacancy rate (more if your community has a current vacancy rate higher than this). Do pro forma financial statement and balance sheet for your household income. Then have a chat with your banker, discuss your projections (pro formas), and see what they have to say before you make any offer and before you apply for a mortgage.
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If you meet the bank’s lending criteria then you can borrow to buy another property. Personally, I think you’re a glutton for punishment.
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I’m guessing that your loan was 45k less than approved because you had this much saved already so didn’t need to borrow it. As a result, you may have much less left for a deposit and may be looking to borrow rather closer to 100%. Approval for that may be harder to get, and you could be biting off more than you can chew. Calculate the repayments and see if you can really afford to buy more. Rental properties come with repair obligations as a landlord – you need to budget in for those too.
References :
For residential income property, the minimum cash down payment is usually 30-35%. No substantial cash = no mortgage, no buy. Plus closing costs, of course. Interest rates on non-owner occupied and investment properties are higher than for owner-occupied. Ditto on the insurances.
If you have the cash for down, closing costs, reserves, and the income and credit, and if the purchase won’t push up your debt ratios too high (as the lender defines "too high!"), you just might be able to do this. Run the numbers! Do a spread sheet on the property, estimating conditions of a 10% vacancy rate (more if your community has a current vacancy rate higher than this). Do pro forma financial statement and balance sheet for your household income. Then have a chat with your banker, discuss your projections (pro formas), and see what they have to say before you make any offer and before you apply for a mortgage.
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first enjoy your home second with the way of the jobs and money problems in this country now i would stay away from any rental issue and by the way i grew up around rental property and all the problems that came with them from top to bottom and everything in the middle, stay away from rental headaches.
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You can purchase another just as soon as you can afford it.
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