I only bought one real estate property ever, in late 2002, the very beginning of the bubble (at least in Orlando.) However, I was cautious to only get the mortgage that I could afford and put 20% down so as to get a better rate.
These days, if you have good credit and can put 20% down, will they let you get about the same size of a mortgage as they did before the bubble? Some sort of formula like you can’t spend more than 1/3 of your income on mortgages and loans? Is that general rule still in effect?
If it is, does that also apply to rental property you might buy? Or is it more restrictive due to risk, or less restrictive because you’re getting income from it?
Bonus question, how difficult is it to convert a rental property into a primary residence, loan-wise? In other words if you get a loan to purchase a rental property are there clauses in the loans that would kick in if you later decide to live in the property?
Actually, I think the issues may go the other way. Commercial loans are harder to get and more expensive than primary-residence loans. So I can’t see any problems with your loan if you move in to your rental property.
I refinanced a condo that I’m renting out. When I told them it wasn’t my primary residence and that it was rented, the rate went up, and qualifying was a little harder.
It seems to be more restrictive these days. I purchased my home prior to farting married, about two years ago. I had a great credit score, over 740, but went thru a terrible divorce and became disabled at the same time. Even though I put 30k downand my credit score was 620, not great but better than some I have seen I had to have my father co-sign to get the loan. No more "no doc"loans because you put down a large down payment.
Fast forward two years and wife and I are attempting to buy a new home. She is a teacher, so her income is modest, but she has
a 830 credit score. We decided to finance in her name only as her score is so much better than mine and my income isn’t much on disability. She got qualified for $170k at 3.9%. So it seems that the mortgage market is loosening up a bit.
Expect to have to provide a LOT more documentation that for previous loans. For a rental property you will find that the rate will be higher, the inspection more thorough and much more attention paid to your finances. The same would probably apply to a second home - which of course, would have to meet some sort of geographical requirement - i.e. not the house next door or in the same town.
My escrow agent claims that since the meltdown, most banks are running with a very lean staff and they are late on everything - so pad your closing dates accordingly.
I got my own mortgage as a single last August. The property I bought was way less than I could afford according to the previous guidelines. It went pretty seamlessly but my buyer’s agent was friends with people at the bank and I had personal connections to her as well. Still, it was way different than when I bought a much more expensive house in 2000. They went through everything with my personal finances and even sprung some stuff on me like requesting my documented spending habits for the last month with proof down to locations and references. It worked out fine but it seemed much more similar to getting a Top Secret security clearance than a loan.