I'm severely underwater with current mortgage - Will this affect my chances of obtaining a loan for a new home?

Yes, the amount of equity you have in your current residence (none, or upside down) will impact your attempt to purchase another home, but may not prevent it. Here is why:

Last year, in an attempt to stop people from purchasing a new, nicer home at current market and then letting an existing, upside down home go back to the bank via foreclosure, the lending industry instituted some new rules. To prevent the "Buy and Bail" phenomenon, you must have 30% equity (or 25% for FHA) in your current home in order to use the rental income to qualify for the new purchase. If you do not have the equity, you can still buy a new home, but you must have sufficient income to qualify making both payments without the benefit of the rental income offsetting the expense of the rental. This is a problem for most people, but may not be for you. Most simply can't afford to make both payments.

There are four main factors the bank looks at to qualify you: Credit Score, Loan-To-Value, Debt-To-Income ratio, and Assets/Reserves (cash in the bank). Specific to the loan on the Duplex, the Loan-To-Value was your problem. On a new puchase, that property would be classified as an investment property, and the fact that it is upside down does not directly influnce the loan for the purchase.

Your application for a mortgage loan and being rejected will not have an adverse reflection on your credit or credit report and will not adversely affect your ability to purchase a home in the future.

You are ahead of the game. You are able to pay your mortgage each month. That is a good thing

This is just a bump in the road, most all investments go through some type of adjustments sometime. This will not last forever. Your duplex will eventually begin appreciating in value soon. The worse part is coming to a close. All property values across the United States took a dip in the last few years.

This did not ruin your plans just set them on the back burner for awhile, all is not lost.

Even though you might not have been able to get a loan on your duplex, you could be qualified to purchase another duplex. In this real estate market houses are cheap, mortgage interest rates are the lowest in decades.

This should be your focus now taking advantage of the real estate market, securing your family's future. There are many sources of finding money to secure what ever you want to purchase.

You were smart enough to figure out the duplex part, you should do that about two more times prior to the purchase of your dream home.

I hope this has been of some use to you, good luck.

"FIGHT ON"

in directly, the value of the old house will NOT effect you getting a loan on a new house.

HOWEVER, you will need to be able to afford BOTH the old and new mortgage. The lender will NOT!!!! count the rental income on the old house to off set your old mortgage payment. Here's why. The new rules are that in order to count rental income, you MUST have at least 30% equity in the old place, or the full mortgage payment will be counted as a monthly expense - the same as a car payment. The reason is that people were saying they were renting the old underwater place, get a new mortgage and then walk on the old place.

I'm surprised that a "lender" like Beverly S didn't know this.

It sounds like your income / debt numbers are good and should not impact your purchase of another place .

Also , many loans allow for 'extra' payments without penalties .

You can always put that extra cash onto your principal ,

It does Not have to be an official 15 year , just make extra payments and it ALL goes to principal .

About the 2nd loan , if the first is fully 'performing' and if you lined up the 2nd renter , the next 'owner occupied' loan should flow

BUUUUUUUUT ,

Not all lenders think alike , check with your bank , your credit union and your broker .

( I actually get my best rate from the brokers banking division ! )

good luck

>

I am a mortgage lender for the last 23 years. Your denial on the duplex will have NOTHING to do with purchasing a new home- as long as you qualify with income/credit & equity in the new home. You will need a lease for both sides of the duplex in order to be able to count the rental income. The only reason you were denied is because lenders can't lend more than the appraised value. Good luck!

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What you should be doing is talking with a financial advisor. While it may not be impossible, sounds to me like you would be taking on more than you can afford in the current situation.

g'day ima

we were in the same boat in qld oz.we bought 2 studio apartments in robina qld at bond university for $330,000,we tried to flog em, but were gunna blow $80,000,we were paying %10.9,we saw our financial advisor,spilled our guts,& told him the trouble we were in.instead of flogging those units we bought 2 townhouses,%100 from bank at% 6.1.now instead of owing $600,000 we ow the bank $1.2 mil,interest only loans,& equity of about half a million bucks on 6 properties.IF U BOUGHT THESE DUPLEXES FOR $360,000 & MORTGAGE IS $271,000 U HAVE EQUITY OF $89,000 MY ADVICE

SEE A GOOD FINANCIAL ADVISOR,A LOT A SHONKY MUNGRELS OUT THERE,CHECK THE NET FOR BEST DEAL,BANKS SHOULD BE THROWING MONEY AT U ON EQUITY LIKE THAT.U ONLY LOSE THAT $150,000 IF U FLOG THE DUPLEXES,AFTER THE APPRAISAL.WE HAVE BODY CORPORATE ON 5 OF THESE PROPERTIES $10,000 P/A + COUNCIL RATES $10,000 P/A.INCOME ON 5 PROPERTIES APPROX $60,000

our combined income is $100,000 Aus

regards

kirrakid

oz