Mortgage Broker Santa Monica | How to Buy a Second House

Mortgage Broker Santa Monica

What steps can consumers take to decide if they can afford a second home?

  1. Before submitting an offer on a property, seek the assistance of a qualified mortgage broker to obtain a complete pre-approval.
  2. Share as much information as you can with your mortgage broker because the more information, you have the more effective, they can be in finding the best solution for you and helping you buy your second home
  3. Ask your chosen mortgage professional to share with you your Debt-to-Income Ratio
  • Your debt-to-income ratio is crucial since it will determine if you are able to comfortably afford the payments on two residences.

3 Options To Take Advantage Of To Increase Your Income To Qualify For A Second Home

  1. Co-Signor – Find additional family, friends, or partners who are open to being co-signors and enjoy the benefits of having a second home with you. An example is a couple who bought a second home in Coachella because they went every year to enjoy the festivities. They couldn’t qualify by themselves, but they knew another couple from their frequent trips there and they decided to buy a second home together. So now the two couples enjoy Coachella for free and they make the mortgage payment for the whole year with three weeks of rental income during the weeks they are not there for Coachella and Stagecoach. Airbnb/Verbo and other sites can be used to
  2. DSCR – Debt Service Coverage Ratio Loan is a non-owner-occupied loan that can be used for investment properties. When using this loan, the lender will not look at your debt-to-income ratio to qualify you but rather the income of the property itself. This way you can use the rental income to boost your income.
  3. Trust – If you have cash that is not being used in your bank account you can put that money into a trust. You can then use that trust to pay you monthly and use it as an income source.

What should consumers watch out for before buying a second home? What are some of the pitfalls?

The most common pitfall is making an offer before you have a professional mortgage broker issue a pre-approval. A lot of times while you people are on vacation and they might see a home that they fall in love with, make an offer, and go under contract without ever talking to a mortgage broker. Then they find out that once they are under contract they don’t qualify. So, seek pre-approval before you start looking.

The second most common pitfall is not understanding the requirements of a second home. Second homes are meant to be lived in part of the year and some lenders may require that you live within a certain mile radius of your second home. So, make sure you consult with a real estate or mortgage professional so that you fully understand the requirements of a second home.

What advice would you give someone who is considering a second home?

The property itself is also very important so it’s important to have a qualified real estate agent to help you select the right property in the right location and structure your offer so that you have a smooth transaction but also make sure that you don’t have buyer’s remorse. A qualified agent will be able to share recent comparable sales, so you have context on what to offer. You will also have access to their industry experts such as home inspectors and title representatives to let you know about any issues and protect your interest.

Selecting the right mortgage broker and real estate agent is crucial in successfully buying your second home and avoiding common pitfalls. I recommend using real estate and mortgage professionals that have a strong online presence, work in the full-time industry and respond quickly.

All of this may appear to be quite overwhelming. To discuss any of these issues in greater depth, please contact us directly.

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