Q: My wife and I are looking into purchasing a home in the District. I have worked for the fed-
eral government for the past 15 years, and my wife has a permanent job working for the State of California. My last position was an overseas assignment, and I recently have been transferred to Washington, where I will remain for at least three years. My job will allow me to spend about one week each month in California.
When we were trying to get preapproved for a mortgage, our bank told us that we would only qualify for a “non-owner-occupied” loan, which carries a higher rate and requires a larger down payment. I tried to assure the loan officer that I would be the only one occupying the property and it would be vacant when I’m in California. He said that because we already own a primary residence in California, he has no choice but to consider this purchase as an investment.
I’m reluctant to pay a higher rate just because the bank doesn’t believe we won’t be renting out the house. Is this a common practice?
A. No. While the mortgage-underwriting guidelines have tightened up to the point of absurdity, there is no reason your purchase shouldn’t be treated as a second home.
It’s true that lenders are very wary of mortgage fraud, particularly applications for owner-occupied loans from borrowers actually trying to buy a rental property. It appears to me, however, that your situation is clear and straightforward. I would speak with another reputable lender or broker. Here are a couple of things you may want to provide:
- The letter from your employer detailing your transfer from overseas to the District, if one was provided to you
- A separate letter from your employer that outlines your job and location of work
- An additional letter from you certifying that you will be using the property as your primary residence
The days of common-sense underwriting are over. This has been a hot button of mine over the past couple of years. Your lender is making an excuse not to make you a loan. My recent experience tells me lenders are reluctant to make any kind of mortgage loan unless it fits the cookie-cutter mold dictated by Fannie Mae and Freddie Mac.
While the Obama administration touts in the media the progress that’s been made to thaw the credit markets, I can tell you the thaw is a lot slower than officials are admitting. Your situation is a perfect example.
Common sense tells us your purchase in Washington is indeed a second home, not a rental. However, because your wife lives in California and you own a home there, your situation doesn’t fit into Fannie’s and Freddie’s mold. Therefore, lenders are apprehensive about making the loan. In the words of a colleague who sells his company’s loans directly to the two agencies: “Freddie and Fannie are actively looking for any excuse to not purchase a lon.”
Still, I have brokered a few mortgages for a second-home purchase with very competitive rates in recent months. Find a reputable mortgage broker and he should be able to get it done for you.
Henry Savage is president of PMC Mortgage in Alexandria, Va. Send e-mail to henry.savage@pmcmortgage.com
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