How can owning a paid off townhouse help me buy a house?

Question

I live in a San Diego suburb where prices are falling.

My husband and I will have our 1700 square feet townhouse paid off in a few months.

We are planning to have a baby soon, but would like to buy a single family home (with a yard!) within 6 years for our future family.

We only have about $50,000 in savings to use as a down payment, could we still buy a home in a few years if they prices are a lot lower?

We will own our townhouse outright and have no other loans (equity, car, etc.).

We also have nearly perfect credit.

We are planning to rent out our townhouse and put that money towards the new home loan.

How can owning a paid off townhouse help me buy or qualify for a house?

Answer 1

The question I have is, "What is your goal for owning the townhouse?" If it's for the income stream, then keep it. If it's not, then evaluate it for its usefulness in your overall goals. It may be better just to sell it and apply the money from the sale to the purchase of the house you think you want to move to.

Another way you could use it to acquire the house you plan on living in is to remortgage it for enough money to make the down payment you may need on the house, or borrow the entire amount for the second place, assuming the townhouse is the more valuable of the two. This would allow you to buy the second place outright and leave your debt in place on the rental property. If you can show that rental income from the townhouse will cover enough of the mortgage that it won't make a loan to you an iffy prospect for the lender, you shouldn't have any problem getting the financing. After all, you've got some serious equity in the structure and the land and it probably makes your balance sheet look pretty good.

As far as the 50K in savings is concerned, my rule of thumb is never to take anything from savings that I can get somewhere else. You've managed to save that amount inspite of living costs and paying for the townhouse. Keep it as long as you can, hopefully for the rest of your life so that it can make you more money, and try to find ways to get the lending institutions to commit loans, using their money, for the other purchase. With your credit and your apparent solidity, there shouldn't be that much of a problem.

Another thing to do is to go to the library and check out materials on buying and investing in real estate. That you've bought and almost paid for the townhouse says that you are interested in and understand something the subject and its possibilities. Take a few months to educate yourself somewhat before you make the leap you're considering. The materials I'm suggesting you study will show you ways and possibilities for financing without any, or with very low, risk to your personal savings.

Good luck. I truly hope some of this helps.

Answer 2

The benefits of 100% ownership of your townhome and the affects it will have on the purchase of your second home.

1. Credit History

2. Income & Assets

3. Liabilities

Your credit score determines the amount of money to lend and how much to charge.

Based on your information given, you will easily be approved for the purchase of your second home. You have great credit, no liabilities, rental income & verifiable assets.

The problem is to find a loan that will fit all your needs. You need to obtain a loan officer to structure a program to fit your lifestyle. With the variety of programs to chose which one should you select?

I can get you pre-qualified today! Don't wait a 5-6 years the cost of homes will be much higher than they are now. Property values almost always increase and rarely decrease. It has been stable for the past two years. I wouldn't say the home values are "falling". Buy now, in 5-6 years you may have gained enough equity to purchase some investment properties.

My name is Veronica Garcia, Loan Officer/ Mortgage Specialist with Amber Financial Group located in Chula Vista (San Diego).
I am a honest lender that truly cares about making sure you are completely satisfied with every step of the application and loan process. Structure a loan to fit your life & future plans. Call me today for a mortgage consultation, analysis & pre-qualify all free and no obligation at all. Get pre-approved within 24 hours.

Amber Financial Group: Veronica Garcia
1105 Broadway Suite 205
Chula Vista, CA. 91911
Toll Free: 1-800-858-0911 ext. 303

P.S.

100% Ownership Benefits:

Rental Income
Valuable Asset
Mortgage Payment History

The Affects:

Great Credit Score

Answer 3

Your rental income will be used to qualify. However, the calculations are a bit reserved. If you don't have rental history on the property, you are given credit for 75% of the gross rent you expect to receive on the condo. You then subtract the expenses of property taxes, insurance, & HOA dues. The net left over is used as income to help you qualify. Often, it's not a major impact.

Example: $1500 rent x 75% = $1125

Assumed Taxes: $200 month, Insurance $50 month, HOA $215 month total = $465

Net usable qualifying income: $660/month

This can make a difference from $40-70K in your qualifying amount depending upon the mortgage loan you choose.

Feel free to contact me at http://www.slarson.com/contact or [e-mail] if you have additional questions.

Answer 4

i happen to be familiar with the area you are talking about and my son is a Realtor there, although i live in the east. i have gone with him and seen first hand what is available. you are right the market is falling where you are and here too by the way. what is unique in your area is the incentives builders are offering to buyers today. some are offering as much as 5% off or a reduced rate for a loan for five years. unheard of until about a year ago. what is happening is this. the homes are not selling and the builders note is due at the bank for the house. he is forced to pay a monthly payment while he waits to sell the house. you can see the advantage of getting a house as soon as possible. once the glut of houses is gone and you know the builders will slow construction because of this problem...the deals are gone forever.

Answer 5

Why not sell the townhouse outright, and use that ,money for yoru downpayment? It will make your mortgage easier to handle. You already sound like you're in great shape as far as qualifying for a mortgage loan. Keep the $50,000.00 you have and invest it long-term for the future. (Downpayments usually are only required to be 10-20 percent of the value of the house, so unless you're going high end, you shouldn't need to use that AND the proceeds of your townhouse sale.)

Answer 6

That is a huge asset that you have in your favor. You should be able to get a loan against it with little or no problem, like a home equity line, if you need more money to make a down payment. Then you can use your rental income to offset the equity line and have enough for the downpayment you need.

Answer 7

You could always use the equity that you have in the townhouse and take out an equity line of credit to finance the purchase of your new home.
In other words.... you would be taking out a loan on the the town house to purchase the new house.

Answer 8

Take out some of the equity you have in the townhouse (equity load/ mortgage) and use those dollars to beef up your down payment on a second house.

Answer 9

Hey,
Well, I think that owning a paid off town house will be perfect for your situation. Reason being that once you buy your new home, you can use the money you get for renting the town home out to help pay for your mortgage. That's one more income to what you already have. There is nothing better than having alittle extra income around to help you out.

Answer 10

You can rent out the townhouse and make more income, to pay off your mortgage sooner, or sell it and buy a nicer house, or have a smaller, shorter mortgage (a 15 year mortgage will get you a lower interest rate).