Author Topic: Getting a Mortgage for a second home - Colorado recomendations?  (Read 1568 times)

Coloradostache

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Getting a Mortgage for a second home - Colorado recomendations?
« on: January 03, 2017, 09:27:23 AM »
I'm looking at moving out of my current house, renting it out, and purchasing a second home to live in. 

What is the best way to go about getting a mortgage?  Does anyone have a recommended contact for the Denver area?

Also, the new house is being bought from a friend who has mentioned he would be willing to hold the current mortgage he has (30 year /3.5%) and have me pay him if I give him some cash to pull out of it.  Seems like a good option to me as I won't have to qualify and its at a good rate.  Seems like there is some exposure for both of us though, any thoughts on this?

okobrien

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Re: Getting a Mortgage for a second home - Colorado recomendations?
« Reply #1 on: January 03, 2017, 08:23:27 PM »
Coloradostache,
As far as getting a mortgage on the second house using traditional methods, you will have to qualify for both mortgages without counting any of the rental income yet to come.  If you can't qualify for two mortgages on your current income, you could move out for a year and live somewhere else while renting out your place.  Many banks will count that first year of rental income as income.  (They will probably only count about 70% of the income though.)

In my opinion, the second option with your friend is the best option for you.  Unless your friend has a VA or FHA loan, you can't technically assume the mortgage, but you can do what is called a "subject to" deal.  There is a slim chance that the bank will call their loan, but the odds are in your favor as long as you make the payments on time.  You can also accomplish effectively the same thing by setting up a land trust with your friend.  This rout is more complicated, but the chances of the bank calling the loan are even smaller, as I have come to understand it.

I would push hard for a subject to or land trust deal.  Even though you would probably need to get a real estate attorney to help with the deal, you and your friend will be saving money in every other aspect of the deal.

BuffaloStache

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Re: Getting a Mortgage for a second home - Colorado recomendations?
« Reply #2 on: January 03, 2017, 09:09:36 PM »
I'm replying to this thread since I live in Colorado as well, and this the OP's plan is one that I hope to follow (albeit, I won't be ready to buy the 2nd home for another 8-18 months). Also, ColoradoStache, I'll send you a message of who I used to lock in a 3.125% 15-year fixed. That was back in early 2015, but my understanding is that the rates haven't gone up a ton.

Coloradostache

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Re: Getting a Mortgage for a second home - Colorado recomendations?
« Reply #3 on: January 04, 2017, 09:10:39 AM »
Thanks for the advise okobrien and BuffaloStache.  I'll look into both.


BuffaloStache

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Re: Getting a Mortgage for a second home - Colorado recomendations?
« Reply #4 on: January 04, 2017, 02:40:28 PM »
Be sure to let us know how it turns out and/or which way you end up going!

Coloradostache

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Re: Getting a Mortgage for a second home - Colorado recomendations?
« Reply #5 on: January 05, 2017, 11:51:53 AM »
I spoke to the mortgage broker you recommended, and he seems to think that if I have a rental contract in place prior to closing on a new place they will count 70% of the income, which should allow me to qualify for a traditional mortgage.  Given that I'm doing the deal with a friend, it should be easy to time it all.  Waiting for pre-approvals and discussing with my friend.  Thanks again.

BuffaloStache

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Re: Getting a Mortgage for a second home - Colorado recomendations?
« Reply #6 on: January 05, 2017, 05:50:50 PM »
Glad to hear it- good luck!