Buying a second property

i just bought my first property and i’m trying to figure out how long it will take for the bank to be able to qualify me on a second property. while thinking about this, i am wondering if and whenever the bank does qualify me for a second home, let’s say 80% loan to value, if i were to buy one of these rinky dink homes for about $20,000 and the auditor has it appraised at $58,000. if the bank qualifies me at 80% loan to value then i would be able to purchase this home at $20,000 and be able to pull out $26,400 which is 80% of the property’s value minus the purchase price. Is this possible. Would i really have $26,400 to work with? Does anybody know the answer to this? if so please respond.

Yes, this is correct. However you would have to close on the property first, then refinance to get the cash-out. You will not be able to get cash back at closing. Also, you might ask your lender about their minimum loan size. Many companies have a minimum loan size of 50K.

thanks christopher w.

but do you have any idea on how long it would take to qualify for a second mortgage. what do lenders look at to see if you can afford it? debt/income, credit score, i.e.?

They look at all of the same things as on the original loan. They will add the first mortgage into your debt ratio as well. Depending on the lender they may allow you to use the income from the first property towards qualifying, some do some don’t. They should allow you to use the current operating income statement to help qualify for the loan as well. Your broker should be able to explain all of this to you in detail.

The 2nd property should not be a problem. However, after 2 properties, it becomes a little more dicey.

Some lenders have “rapid acquisition” rules which prevent you from acquiring too many properties too quickly.

Some lenders limit the number of properties you can finance with them and in total.

And some lenders will require 2 years documentable landlord experience before you can buy more than 2 or perhaps 4 properties, depending on the lender.

It just depends on the lender, but most lenders have some or all of these restrictions. After you have owned investment properties for at least 2 years, it becomes easier to buy more properties.

okay so what is the rule on owner occupant. can a owner occupy more than one property. i know a lot of people that own vacation homes. what does the law in ohio constitue as LIVING in a property? does anyone know this?

Sounds like you’re trying to get around the rules and get an owner occ loan on rental/investment property…not a wise idea. There is a word for this behavior, it’s called fraud and if I were you I’d just suck up the slightly higher interest rate, etc and live with it.

in no way am i trying to commit fraud. i have asked this question before on this website and everyone automatically assumes that it is leading to fraud. i do not want to go to prison, that’s the reason i am asking questions. is anyone able to tell me what constitutes LIVING in a property?

Please explain to us what this property will be used for so we can better understand what its purpose will be.

okay. if i buy a property with owner occupied financing, am i alound to have roommates that pay their share? this is the bottom-line question that i am trying to get answered. i’m only talking about one property here. the second part to this is that i understand if i use a owner occupied loan to get a property then i have to live in it, and i’m not trying to violate this law (that’s why questions are being asked). But what constitutes LIVING somewhere? Is it whether or not i have a room there, recieve mail there, etc. what is it???

You can’t have 2 primary residences. You can have a primary and a secondary (vacation home, for example). Living there means that you spend the majority of your time in a specific house.

If you have ‘room mates’ paying your mortgage and you aren’t living there at all, then you are a landlord, not an owner occupant.

Thanks for the clarification. But just to confirm, if i have roommates and i am living there as well, this is perfectly legal. Is this correct?

Yes, that’s legal. Are you planning on moving out of your first property and into a new one, then renting the original?

after the 1st year. in ohio you have to live in the property for at least a year with an owner occupant loan.