Jan
02
we want to buy a home when the market bottoms out. When do you see this happening?
By
here is our situation. We bought a condo in 04/ on a teacher-loan program. It is 4% fixed. We want to buy another house and keep the condo but we are stuck. What if we can’t rent it quickly? What if we can’t make both mortgages? What if we keep it and then the market drops even further and then we can’t afford to keep it? We need advice on the above.
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4 Comments
January 4th, 2010 at 4:05 am
You do realize that you can’t rent the condo out? That HUD program is to help areas have owner occupied properties, not for investors.
January 7th, 2010 at 2:38 am
The lady above me is correct. When you are an investor you must be able to cover the whole mortgage no matter what. Your lender will base their decision on your current property and the property you wish to buy. If you do not have enough liquid cash and 6 months reserves to cover both you will not be able to get a mortgage. I own rental property and I am required to be able to cover the mortgage even if I have no renters.
January 8th, 2010 at 9:50 pm
Landlord is incorrect. People have the right to make life changes as long as its not in a fraudulent manner. The OP purchased the home 4y ago as an owner occupied property and lived in it as such. She now is making a move in her life and is well within her rights to continue paying the mortgage and using the property as a rental property. To more directly address her question– I think that all your questions are good ones that only you can answer. I never purchase a rental property unless we have enough in savings for 3mths of mortgage. You have a beautiful opportunity though– your interest rate is outstanding and rental properties as excellent investments that require minimal down with someone else paying off the loan. With this great benefit comes the risk though and that’s why rental properties aren’t for everyone. Also, please clarify your questions about if the market drops further. The market shouldn;t affect your ability to keep the unit as long as someone is paying your rent.
MRW
January 11th, 2010 at 9:02 am
YOu will need to check your mortgage information, but the vast majority of the special programs require that the home be owner occupied. As soon as there is a red flag, i.e. the lender receives your change of address, they will call the mortgage due, which means you have 30 days to pay it off or refinance it.
Also, you HOA may not allow you to rent the condo, check on that too.
You will have to make payments on both properties whether you have renters or not. If you cannot pay both mortgages, the lender will foreclose. Same if you cannot afford to keep it, if you don’t pay the lender will foreclose.
Foreclosure is devasting to your credit, you will pay more for everything based on credit score and won’t be extended credit for anything without a ridiculous interest rate for at least 2 years.
Also, while you are waiting for the “bottom of the market” – which is going to vary by area – interest rates are creeping up. Since the majority of what you repay is interest, that few thousand you are saving off the price will cost you thousands and thousands in additional interest.