Buying a second home, mortgage loan questions?

Question : Buying a second home, mortgage loan questions?
My dad is interested in purchasing a home for me and “renting” it to me. His house is paid off, he has no mortgage loan currently. Does he have to put down 20%? If so, is there any way to get around that?
second mortgage home loan

Best answer:

Answer by beverley1156
there are several deals going with the various developers offering to pay the deposit so look into these.

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Comments (5)
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#1 written by Beverly S 1 year ago

He can’t use FHA or VA or RD for investment property. Conventional is the only route and I think they want 30% down now for non-owner occupied property. Also VERY high credit scores. It is very hard to buy investment/rental property these days.

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#2 written by tex k 1 year ago

They usually ask for a 20% deposit but he has more than enough equity in his own house to cover the deposit.He should be able to use the value of the house he owns as cover for a new mortgage.Seek independent advise or a bank that you trust( I don’t believe I used the word trust and bank in the same sentence)

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#3 written by Rush is a band 1 year ago

You don’t have to put 20% down, you just have to put 20% down to avoid paying private mortgage insurance. His owning another home (free and clear) won’t relieve the down payment requirement or the private mortgage insurance requirement.

He could (and I’m not saying should, just could) take out a HELOC (home equity line of credit) on the original house and use it for the downpayment on the second house and then take out a conventional mortgage on the second house.

I do have to agree with one of the other answers though… It’s tough to mix family and business. What happens if you want to move or relocate to another area? Does your dad now sell the house? Does he really want to be a landlord? If the furnace failed in this second house will Dad expect you to pay? This is a tough situation!

good luck!

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#4 written by fleepflawp 1 year ago

If you’re dad’s financially stable, there’s no problem with him buying another house. Now is a fantastic time to do so, in fact; and if he plans to rent it out then he’ll recover a large portion of the mortgage in rent anyway (whether it’s to you or someone else). If he’s on a fixed income, however, make sure you don’t go crazy with the house and look for something well within his means.

Most companies are asking for 20% now, but there are some who will accept less. You just have to look around! The days of “no money down” mortgages are over, however! I’d also suggest considering a mortgage broker. They charge for their services, which adds to your overall costs, but mine was able to get me a better rate than I found on my own and took care of everything for me–they also have good relationships with lenders and may be able to give you wiggle room on the 20% equity requirement where you couldn’t yourself.

Try looking around a bit yourself first though–maybe you can find a lender willing to take only 10% down or something. Good luck!

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#5 written by Arabella 1 year ago

Just my humble opinion, but I think it’s not wise at all for your father to saddle himself with another mortgage simply as a favor to you, especially now that he has the luxury of a paid off home. He’s very lucky to be in such good financial position. Why would he plunge himself into debt again?

I know he’s trying to do you a favor, but that doesn’t automatically make this a good financial decision. What if something happened and you weren’t able to make rent payments? Your father would probably just “let it go” and continue to pay the mortgage, but this would put a strain on your relationship. You would always feel greatly indebted to him. What if he wanted to sell the house? He would feel guilty about having to move you out, and this would also strain your relationship.

If you cannot afford to buy a home right now, then your best bet is to rent a nice apartment or small house. There’s a lot of good stuff on the market for you to choose from without having your father go into debt for you.

If your father is interested in real estate investments, that’s another story, but even in that case the best thing is to wait until he can pay cash for a house. That way, everything after that is pure rental profit.

There’s a great way your father can help you out right now – by going rental shopping with you and helping to make sure the place you rent is well maintained, clean and safe.

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