10/8/2019- I hope you are doing well and I hope you had a great weekend. My weekend was filled with family, sports and lots of driving. It ended with a little fender bender (kids) and some lost car keys (can’t say who as I want to stay married), but what else is new?
We are seeing that a lot of people are interested in buying investment homes and some are buying second homes and converting them into vacation rentals too. So here is how it works. You can get a second home with as little as 10% down if you are buying a house in a vacation area or buying at least 100 miles from your home. On a Vacation home / 2nd home, you would have to qualify for that property and the property you currently own. Interest rates are standard 15 and 30 year mortgage rates up to $726,525.00 and above that amount you would usually need 15% or more down unless we incorporate a 2nd mortgage.
If you want to buy an investment property then we can use the rents of the investment property to help you qualify. You can buy an investment property with 15% down but you cannot get a gift for any portion of the down payment. Rates are much better once you put 25% down. If we get over that $726,525.00 loan amount then you would have to put more down. Seller can only pay 2% of the purchase price in closing costs!
Here is an example of a $535,000.00 property with different scenarios:
10% down 0 Point 2nd Home – $481,500.00 – 3.625% – 0 Points – Principal and Interest – $2195.89 – Insurance = $90.00 / Property Taxes $521.00 / PMI $108.34 / Total payment = $2915.23 – Total out of pocket – +/- $63,000.00
15% down Investment property – $454,750.00 – 4.625% – 2 Points – Principal and Interest – $2338.05 – Insurance = $90.00 / Property Taxes $521.00 / PMI $64.40 / Total payment = $3013.45 – Total out of pocket – +/- $99,000.00
20% down – Investment property – $428,000.00 – 4.750% 1 point – Principal and Interest – $2232.65 – Insurance = $90.00 / Property Taxes $521.00 / PMI $0 / Total payment = $2834.65 – Total out of pocket – +/- $121,000.00
25% down Investment property – $401,250.00 – 4.000% 1 Point – Principal and Interest – $1915.63 – Insurance = $90.00 / Property Taxes $521.00 / PMI $0 / Total payment = $2526.63 – Total out of pocket – +/- $143,000.00
By the way, the above property rents for about $2800.00 per month in most areas. You are paying off about $7000.00 + per year on each of the loans and if properties go up by just 3% annually then your investment will earn 15% – 30% annually! I like this as timing to buy an investment property as prices were pretty stable this year and interest rates dropped!
Interest rates are still a little whacky right now! Yesterday we had 2 changes that pushed rates higher and 1 that moved them lower. Credit scores are very important on all conventional loans right now as the buydowns can be extreme. Here is a glimpse of where they are at this time:
Interest rates are still in the 3.5% (3.62% APR) – 4.00% (4.00% APR) range for conventional loans.
FHA and VA Rates are in the 3.25% (FHA APR 4.578 / VA 3.35% APR) -3.50% range (FHA APR 4.683 / VA 3.42% APR)
Jumbo Loans are in the 3.75-4.250% range (APR 3.796-4.309)
Why Ranges? Because they are changing a lot and a 3.50% Rate may be $1000.00 more in cost than a 3.875% rate depending on a credit score and down payment. Every deals seems to price differently depending on the time of day!
I will be in the office all week. We have a few things going on in the evening this week so get me early tomorrow and Wednesday. I will be speaking at COC tomorrow night during game 5 of the Dodgers and I will be eating donut holes on Thursday against some famous people (Remax has an entry and so does KW, the Junction, the city, and so many more) for charity on Thursday! Let me know if you need tickets for a Hole Lot of fun https://www.holelotoffun.org. I have a few extra tickets I purchased and we can always buy more! My Cell is 661-714-6258 and my office is 661-260-2970. I hope to hear from you soon!