Some people looking to buy a second home for either their own leisure or to possibly resell in the future will look into mortgaging that home as well. Many wonder if this is even possible, can you pull out a new mortgage for another home? The answer is yes, you can. However, there are a few things to understand.
Second Homes and Mortgages
When getting any loan, including a mortgage, the lender will calculate your credit score and will also look at your debt. If you already have a mortgage on one home, keep in mind that every dollar owed on that mortgage counts towards you being in debt. This debt ratio weighs heavily in the lender’s calculations. What that means is, even if you can handle the payments of this mortgage perfectly fine, the interest rate will be considerably higher.
If the interest rate and payment plan is manageable and beneficial for your plans, then by all means look into getting that mortgage and the second home. It is difficult for most people to be able to do something like this due to the high costs of mortgages, but some people can definitely handle it.
Another possibility is to use the equity on your current home instead. If you own a good chunk of the equity on your current home, you should consider looking into a home equity loan or line of credit. These forms of loans against the home are essentially a 2nd mortgage on your first home and the interest rates are fairly low. This is a much advised option if you have ownership of a good amount of equity in your home.
Buying a second home and mortgaging it in addition to your first mortgage is definitely possible. But, especially in this case, it is extremely important to look into all options available since it gets trickier the second time around and the interest rates are bound to be higher. Still, over 30 percent of home purchases over the last three years have been second homes, so it can certainly be done.
By: Sergio Haros
Posts Tagged ‘Credit Score’
Mortgage Rates Drop For the Second Time in a Month
January 21st, 2010
During the month of October we have seen a couple shifts in a 30-year fixed rate mortgage, for the good of the consumer and real estate market. During the first week of the month, we saw the rates drop down nearing all time lows since about Mid 2009, when the rate was at a 4.82 percent. On the 8th it was said by representatives of Fannie Mae that the rate had hit 4.87 percent, almost a whole percent lower than last year. The 15-year fixed rate also hit a low, at 4.33 percent, also a lot lower than it was this time last year. And also the lowest it has been since 1991, when the Market was at its peak.
What does this mean for the potential borrower and lenders? For the borrower it gives them more money to work with, when considering such an important purchase as a home. This is especially good news for those first time home buyers, trying to take advantage of the first time home buyer credit. Having a lower interest payment, calls for lower mortgage payments in general, in turn less of a chance for a borrower to go into default on their loan.
For lenders, its bringing in more mortgage applications since January 2009, giving them more hope that less borrowers will go into default, because of such high interest rates that we have seen in the past, in turn making every ones stress eased, at least for now. Many experts have said that the homeowners who are looking to refinance their current loan will benefit from this drop in rates more than a potential buyer looking to purchase.
Just because the rates are nearing an all time low, doesn’t mean lenders are going to give out loans to just anyone. You still must meet the high standards of the lender, and keep in mind, standards of borrowing vary by lender. They still want to be sure that they are going to get full repayment of any money borrowed. Having a solid credit score, income, and down payment are just a few of the things that lenders are really looking for in order to even consider you for a loan.
If you are considering taking advantage of these low rates, contact a mortgage professional to pre-qualify you before you waste your time shopping for your home. It is important to do this before hand, that way if you don’t get qualified you are not disappointed when you already have your heart set on a home. Make sure to review your credit reports, and have all your financial information ready prior to consulting with a Lender. Your lender will be able to find the right loan for you and your family. Don’t think for one second that you wont be able to get funding, because there are many alternative ways to go about it in todays market, if you qualify of course. Consult your lender today.
By: Yanni A Raz