A reader asks, “I would like to know how hard it is to get a loan on buying a second home. Our credit scores are 649 and 685. Before anyone runs our credit again, my husband makes 2000 a month plus we get SS of 2500 a month.”
The answers to this reader’s questions depend greatly on a number of factors not mentioned in the question. First there’s the question of the first home–is there an existing FHA mortgage? FHA loans for new purchase transactions require occupancy and borrowers are not permitted to apply for FHA loans for homes they don’t plan to occupy as their full time residence.
FHA loans for single-family homes are intended for borrowers to purchase for their own occupancy and an FHA single family mortgage can’t be used on an investment property.
Occupancy issues aside, FHA loan qualifications include calculating the borrower’s debt-to-income ratio. A borrower with an existing mortgage loan could theoretically be able to afford a second mortgage assuming there’s enough income to qualify, but for many borrowers the debt to income ration in such cases could exceed FHA limits.
The third issue with the situation suggested by the reader question involves the borrower’s creditworthiness. A borrower who has an excellent payment record and who has FICO scores that fall within the lender’s standards may be able to qualify, but in a situation where there may be a high debt to income ratio–one close to the limits of what the FHA loan program and/or the lender’s standards, any marginal repayment history would make the loan very hard to justify.
In any new home loan transaction, it’s recommended that the borrower come to the application process with at least 12 months of reliable payments, but that record is even more critical when there are factors such as a higher debt to income ratio.
Do you have questions about FHA home loans? Ask us in the comments section. You can get information about applying or getting pre-approved for an FHA loan at FHA.com, a private company and not a government website.