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Buying Through Corps.; Investments vs. Primary Residences

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Ask a Mortgage Banker... is part of Curbed University's attempts to give you the best non-boring advice on buying, selling and renting in the Hub. Our expert answerer is Brian Cavanaugh, senior mortgage banker at Residential Mortgage Services Inc. Send your questions today (anonymity guaranteed).

A reader wrote in:
I want to keep my current home and buy another. I'll rent out the 1st and family will move into 2nd.
My problem stems from the fact that I incorporated in 2007, and keep my personal income to a minimum. The Corp brings in plenty of cash as I am an editor in Television and have worked steadily for 18 years. Can the C-Corp buy the 2nd home? What would the interest rate be? I have personal fico in 800's and the business has only a car payment as ongoing debt.

Here's Brian Cavanaugh's answer:
Fannie/Freddie do not allow financing on corporations.

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Another reader wrote in:
Can you describe any of the differences between mortgages for primary residences and mortgages for investment property? Does taking out a traditional mortgage for a primary residence preclude rental activities without consulting with your lender?

Here's Brian Cavanaugh's answer:
Thank you for the email.

The differences for mortgage financing on primary mortgages to investment properties are rates and loan to value regulations/guidelines. Historically, rates are higher for an investment property than an owner occupied property.

Also, when you buy or refinance an investment property, you need to have a greater down payment; at minimal now it is a 20 percent requirement. And, when you refinance an investment property, you need to have a 80 percent loan to value.

If you refinance a home as an owner-occupied home and then move out, you are fine to turn that home into an investment property.

There are a few products on the market now, however, that are only owner-occupied mortgage products.
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