April 8th, 2019 1:25 PM by Devin Murray
Tapping Equity - Buying Second Homes and Investment Properties
We typically get several inquiries a week from people all over the country who want to learn more about what it takes to finance a second home or investment property from Huntsville to Miami. Most are shocked to learn that they only need 10% down for second homes and 15% down for investment properties (excluding condos). Among those that inquire we find that most have sufficient credit and income to easily qualify but don’t have enough assets in hand to make the down payment on the “perfect place” they really love or the ideal property that will generate the most rental income so they do not take action.
With several publications announcing home values grew at national average just under 7% year or year as of QE4 2018 (which equates to nearly a $17,000 average increase) the average consumer who has owned for three years or more has much more equity than they realize. With the Fed’s announcement for 2019 and rates hitting 12 month lows two weeks ago, there hasn’t been a better opportunity for your customers to capture some of this equity and put it to work.
No two customers are ever the same and neither are the solutions on how to access equity. HELOCs are an excellent answer and will normally allow cash-out up to 90% of the appraised value while fixed rate second mortgages follow close at 85-80%. If requirements such as credit score or income for HELOCs and second mortgages are too strict, refinancing of a primary mortgage primary may be a feasible solution. Below is a current summary of what the loan-to-values allowed based upon occupancy.
Owner Occupied:VA = 100% (minus any funding fee)FHA = 85%Conventional = 85% (Freddie requires 740+)Non-conforming = 85% (porfolio and Non-QM)Conventional = 80%Jumbo = 80%
Second Homes:Conventional = 80%Jumbo = 65%
Investment PropertyConventional = 75%Jumbo = 60%
We work with a range of customers from first time buyers of second homes and investment properties to those with large portfolio holdings. If you have a customer who might be in the market who wants to discuss their scenario with one of our licensed loan officers please feel free to have them call, email, or apply online 24 hours a day.
*High Balance loan limits for both AL and FL are conforming loans between $484,351 to $749,525Disclaimer