Your Questions About Mortgage Loan Type

Thomas asks…

What type of loan is best for an investment property ?

I would like to purchase an investment property in which I would rent out. I already own (have a mortgage) on my own home. What would be the best loan to ask for the investment property? Another mortgage loan? a personal loan ? or another type ? Also what is the max number of years available on the best choice of loans ? Thank You

John answers:

You won’t have a lot of choices, as most low down payment programs are only for owner occupied purchases. You will need 20-30% down, very good credit and sufficient income. It will be a conventional mortgage, and you can get a 30 year term. Go talk to a mortgage lender and find out exactly what is available to you.

David asks…

Will a personal loan affect a pre approved mortgage loan?

I wanted a small personal loan of about $1200, will that affect my mortgage loan even if i already qualified for it?

John answers:

Yes, there’s a chance a personal loan will affect your mortgage pre-approval. I’ll explain.

When the bank “pre-approves” you for a mortgage, it’s not a sure thing anyways. They’re basically taking a quick look over your information and telling you they’re “pretty sure” they can lend to you. They can always change their minds, all the way up until the moment you close on the house. I’ve heard horror stories of the bank being able to change their minds the day after closing… But I’ve never seen this myself and I’m not really certain how that’s legal.

Anyways, whether or not the personal loan would affect your pre-approval depends on how strong your approval was. Let’s say you’re looking to buy a $150,000 house, you make $80,000/year and have $0 in debt and no monthly monetary obligations. In that case, your approval would be pretty damn good and adding a $250 monthly payment for the loan isn’t going to be a problem.

HOWEVER, if you’re like a good amount of the population… You might be a little closer to the approval/non-approval line. If you’re looking to buy a $300,000 house, making $50,000/year and have a few thousand in debt and were still approved… Something like an extra few hundred/month in payments could force the bank to change their minds. And yes, they’ll check– they’ll check for the conditional approval, the final approval, and again before closing.

In my 5 years as a realtor I’ve actually had a lot of deals fall through for LESS than your “small” $1,200 loan. I had one family, the sweetest family you could imagine, finally buying their first house… They got through to the final approval when they decided to charge about $1,000 onto their credit cards to buy new furniture for their soon-to-be house. Unfortunately, they were close to the line anyways and this additional $1,000 in debt forced the bank to deny their loan application.

Also keep in mind that certain types of loans (FHA which is 3.5% down and USDA which is 0% down) require very very low debt-to-income ratio, and even though the bank might still let you get a traditional (20% down) mortgage with your new $1,200 higher debt-to-income ratio, that extra debt might disqualify you from the more appealing FHA or USDA loans.

I tell my clients to hold off on big charges unless they’ve got an outstanding income or it’s a life/death situation. Wait until a week after you close on your house and take out the loan. It’s not worth missing out on a house!

Good luck!

Maria asks…

How can I convert my property type from Manufactured Housing to a regular home?

When we took out mortgage loan we took it out for a used double wide and put it on to a first floor. We are still being classified as a Manufactured Home so we are not eligible to refinance. The thing is the whole thing has been redone and its not a manufactured home, is there anyway to get this converted so we can refinance?

John answers:

It will always be a manufactured home, it will not suddenly change into a built home complete with a building permit. You can not alter reality.

Sandra asks…

What is best way to purchase second home?

I currently own one house have a mortgage and tomorrow I am going to purchase my second home, a house next door. What is best way to finance and is there anything I need to be carefull about when signing. My concern is finacial, best loan type and interest rate. I have already been told it will be a investment type loan even though my daughter will live there with her family they will not be on loan at first only my wife and I.

John answers:

I beleive you need to have a John Doe lease made up to show that it is rented or have your daughter sign it. You should be able to get a regular loan at least that is what I have done. When I did not have a lease they did not want to give me a loan without a big down payment. The loan you will be signing should be no diffrent than what you already have. The intrest rate will be a maybe a 7% instead of a 6.

Mandy asks…

I currently am in default with my fha loan due to financial hardship. Is there any good advice to give me?

Due to financial hardship, I have gotten behind with my FHA mortgage loan. I have been in constant contact with the financial institute who has my note and they won’t help me until I am able to make my payment for three consecutive months. If I were able to make the payment, I wouldn’t need the help. Does anyone have some experience with this type of situation and can give me some constructive advice?

John answers:

See the links below for possible help:

http://www.hud.gov/hopeforhomeowners/index.cfm

http://www.hud.gov/foreclosure/

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