Taking out a second mortgage for another home?

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My husband is a Naval Officer and we purchased our first condo/home a little over six months ago with a VA loan.

Next year my husband is changing stations. We would like to buy a new home at the next location while turning our current place into a rental property. We’re already in contact with a property management firm, but I was curious.. How would opening a new mortgage work? Would we even be able to qualify for a mortgage for a second home with our first? Do they take into consideration we would be renting our current residence?

Thanks for the information
When we took out our first mortgage our lender (or the person who processed our loan) was aware this residence would eventually be used as an income property. I’ll have to call and check on that. Thanks for the excellent information.

So another young person question:

I watch these programs on HGTV that come in and help people fix up their homes so they sell. People on these shows usually have already purchased a new home and are “afraid of carrying two mortgages..” If it’s so difficult to get a mortgage for a second home, how do they do it?

3 Comments
  1. Reply
    the kid
    April 30, 2011 at 1:15 am

    You’ll need to qualify, and you’ll need a rather large down payment.

  2. Reply
    Steve D
    April 30, 2011 at 1:17 am

    You may have two problems – first, qualifying for the mortgage on the new home while still carrying the mortgage on your existing home – you will have to have a lease in hand showing the income from the current home, otherwise, you can’t claim income which means you would have to qualify based on paying two mortgages and on current income.

    Second, unless you notify your current lender, you are probably in violation of your condo mortgage the minute you rent it out – most mortgages are for primary residences and when you rent the home out, it becomes investment property, which usually carries a higher interest rate. If the mortgage holder finds out, they can usually call the loan meaning you may have 30 days to re-finance or pay the mortgage off.

  3. Reply
    Spock (rhp)
    April 30, 2011 at 1:18 am

    first, you need to inspect the terms of your VA loan. some government loans under some programs restrict you from changing the property to a rental — this happened to my son a few years ago.

    the mortgage process for the new property would include both payments as well as the rental income from the rental property. the usual guidelines still have to be met — percentage of income, etc. — or much higher rates will be charged [if you can find a mortgage at all].

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