How do you buy a second home when you have no savings?
I have a home in MD and want to move to FL and turn the MD house into a rental and purchase a foreclosure in FL.
I have an agent in FL and an agent in MD to manage my rental. The problems I am running into are: 1. I have no savings. 2. I make less than $40K annually. 3. I need to borrow money to prepare my rental, pay downpayment/closing costs and moving expenses.
I’ve spoken to lenders but have not allowed my credit to be pulled since I am still doing research. I’ve been told that I can get a loan for the foreclosure and repairs to it once I have a job in FL and a tenant agreement in MD (not a problem).
Will I jeopardize my new home loan by applying for a $10k loan to cover the expenses? I have no equity in my house since I refinanced my car and debt last December so there is not much equity hence why I won’t sell. Unless there’s equity loans for $10k (closely maxes my equity).
Investment programs, tricks of the trade, advice and tips are all greatly appreciated.
Renting’s an option but foreclosures under $75k is cheaper monthly and I have options of equity funds of $25k+ or 80% after repair value. This money is for repairs and can be used to pay off the $10k loan and expenses on both homes like taxes and Home Owners Insurance.
Friends in FL who own pay $700 for HOI (my MD is $500). I’ve seen the taxes on FL homes and yes they’re scary. My car is paid and I have no other debt just the MD mortgage. I can break even on rent since I am paying HOA fees and Property Management fee (no profit) and it’s a small sacrifice to keep my house until I can sell for a profit or worse case scenario I need to move back.
My income is not a lot and will probably remain the same in FL but after everything is said and done, I will own two homes, one for about the cost of renting or cheaper and another that I is being paid off for me by the renter.
If I’m still in FL a year from moving and I equity in my MD home I may sell but it’s circumstantial.
I have heard horror stories about tenants and I am willing to take the risk. If it became that bad I would put the house on the market and pay the repairs from the proceeds.
I can’t buy the second house without a tenant agreement so the house wouldn’t sit vacant. I am not accepting short term leases and worse case scenario is I will have to sell the MD house.
As far as not being in the position, the only reason I’m not is because I don’t have my own funds to use for the transaction. The $10k loan was for 5%downpayment and also closing costs so no 100% financing. In addition, I have a job and I am not in a hole so I can afford most of my moving expenses but PODS from MD to FL are expensive which is what I will need while doing repairs in the new home.
I appreciate all of the advice, but I haven’t gotten from the lenders or agents that I’m not prepared to do this and they all know my whole situation at this point. However, the lenders don’t know about the $10k loan I need.
December 30th, 2008 at 11:20 am
I think you are headed for big trouble. You want to rent our your house in which you have zero equity. Are you sure you can rent it and make a profit after expenses? With your income I seriously doubt you can swing this and buy a house with no savings (IE 100% financing) I like in South Fla. Property taxes and insurance and expensive. Even if you are buying a modest house in FLA. Sell your house in MD or rent it if you can make a profit. Rent in Florida before you buy. trust me. The taxes and insurance are an an issue. And before you buy make sure you can get a quote on the insurance. You might be shocked at the numbers.
Good Luck
Rob
December 30th, 2008 at 7:22 pm
What I’ve heard done in situations like this is that when you purchase the foreclosure in FL, take out a larger home loan from the bank than just the cost of the house (you can usually claim things like repair costs on the house you’re purchasing, moving fees etc) and use that toward whatever finances you need to. It’s a pretty common practice and it helps out with a lot of things — some people also take out larger loans to pay off cars or other bills so that their only payments are home related.
Granted, this all depends on what kind of loan you get, which bank you go through, your credit score and etc.
If you aren’t interested in that avenue, or it simply won’t work for you, you may have to take out a personal loan but making less than $40K annually and already owning one house (which I assume you’re still paying on) and a car (also paying on?) you’ll be hard pressed to find a good loan at a decent interest rate…
Good luck, in any case!
January 1st, 2009 at 12:22 pm
Most lenders won’t loan on a second home mortgage with no money down. And if you do find one, the interest rate will be cost prohibitive.
It doesn’t sound like you are in the financial position to take this risk. What if the MD house sits vacant for a month or two, or requires a significant amount of repair? Never underestimate a renter’s ability to trash a house, no matter how careful you are in selecting tenants. I have a friend that had her rental receive $9,000 worth a damage from a 6 month tenant, it can be done, easily.
And yes, you will jeoparize your new home loan by applying for additional credit now.
This does not sound like a good decision.