What is best way to purchase second home?
I currently own one house have a mortgage and tomorrow I am going to purchase my second home, a house next door. What is best way to finance and is there anything I need to be carefull about when signing. My concern is finacial, best loan type and interest rate. I have already been told it will be a investment type loan even though my daughter will live there with her family they will not be on loan at first only my wife and I.
Public Comments
- Well the "investment type loan" is their way of telling you that you're not going to get the same rate as if this was a principal residence loan, you will be charged a higher interest. You might want to strike a lease agreement with your daughter and bargain with it at the lender to get a lesser rate including offering it as additional collateral. Do a little research FTC: High Rate – High Fee Loans (know your rights): http://www.ftc.gov/bcp/conline/pubs/homes/32mortgs.htm Real Estate Settlement Procedures Act (RESPA) [about closing costs & settlement procedures]: http://www.hud.gov/offices/hsg/sfh/res/respa_hm.cfm Mortgage law an Overview: http://www.law.cornell.edu/wex/index.php/Mortgage For more research material you might want to visit http://www.realestateformnm.com/ResearchLink.aspx I wish you and your daughter the best of luck
- Go for a fixed rate loan-- go for a 30 year loan, even if you pay it off in 15 years, by doubling your payments, you are better off than if you take a 15 year loan, because then you have the contractual obligation to pay it off-whereas with the 30 year loan, you don't have to make double payments--let's say that one month you decide to take that extra money to make a repair, or go on a vacation-- you are less pressed financially with the 30 year loan. The interest you will save by paying off a 30 year loan in fifteen years is vast. Just make sure you send in the second payment with instructions to "apply the payment to principal, first." Good luck! Also, make sure there is no pre-payment penalty on your mortgage. The Lender should provide a truth-in-lending statement to you, and you should know all the fees and closing costs in advance. That's the law. Also, if you are writing an offer to purchase tomorrow, than make sure you put into the contract that if you can't get the loan, your downpayment will be refunded to you.
- I beleive you need to have a John Doe lease made up to show that it is rented or have your daughter sign it. You should be able to get a regular loan at least that is what I have done. When I did not have a lease they did not want to give me a loan without a big down payment. The loan you will be signing should be no diffrent than what you already have. The intrest rate will be a maybe a 7% instead of a 6.
