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I own a home that is a rental property. It has been rented for 6 months now.
I want to purchase a second home to live in. I was turned down for a 15 year fixed. They said that since my first home hasn't been rented for more than 12 months they have to count that mortgage payment.
So, they are computing the first and second mortgage payment.
They said I could qualify for a 30 year but I just want a 15 year.
With today's standards, yes it's common. It's also common not to count the rental income at all unless you have 20% equity in it as many people have put tenants in their homes in order to qualify to buy, and then letting the rental foreclose.
Just go for the 30 year and pay double payments if that's what you want. You can make it a 15 year on your own, and if you have a bad month, you're not obligated to pay the higher payment if you don't want to. Not sure why you're having a problem with it. The rates aren't that significantly different, but even with the higher rate, you'll have more of a tax deduction with the interest write off.
^^ what he said.
paying double pretty much makes your 30 year into a 15. of course your rate is better with a 15 year....but not really by 'that' much.
there is about a 1/2% difference between a 30 and a 15 year. I advise clients to take the 30 year term. You can pay a 30 year in 15 if you want to, but if you have money issues down the road, you can go back to the 30 year payment. Prepare for worse, strive for best.
To use rental income from a former primary residence you must have 30% equity in the property. This has to be documented with an appraisal. It is not 12 months history if it was a former primary residence. This is to prevent buy and bail scenarios.
The issue you are having is a debt to income not different guidelines for 15 or 30 year. Get a referral to an experienced loan officer at a broker in your area as they have access to several lenders rates and guidelines. You also said counting 1st and 2nd against you- different lenders calculate payments for 2nd mortgages differently so absolutely find a good broker to work with.
I don't see the point of a 15 year mortgage.
Get a 30 year mortgage and just pay it off in 15 years (or less if you want!).
That gives you flexibility as well as huge savings.
And go for a 15yr if you can. A 30yr loan is stupid and even more so if you put less than 20% down. The difference for me was less than 500 bucks on a 165k loan. I also saved over 120 bucks per month on PMI. On my loan it's only $30 which will be less than 5,500 over the loan.
The consensus from the mortgage brokers on this thread is the 30 year loan. Does anyone have that long a timeframe any more?
After 15 years (of a 30 year loan), 25% of the loan is paid off. And a tax deduction (~25% of interest paid). That does not seem like a good place to be.
With the tremendous flexibility of renting, the American dream is looking very different these days.
Definitely shop around. Shop your local community banks, they are very flexible and great rates. I'm in the same boat as you, BofA can only offer me 30-yr w/20% down conventional or FHA. A big firm 'NO' when I asked for lower mortgage term. Local banks offer me lower rate and lower %down on conventional loan. They don't do FHA though. IMO FHA is very expensive. I would only use if I have exhausted all other venues.
If you are putting less than 20% down, lower mortgage term is the best to go if you can afford the payment. The 30-yr term is expensive, and you will never attempt to pay extra afterward. LOL.
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