Here’s a quick update on the status of Rental Property #5. I officially started the closing process with the lender yesterday, after they pre-qualified me to purchase another rental property. Woohoo! Even better, this lender won’t be scrutinizing my debt-to-income ratio (like what happened during the last purchase with Rental Property #4), so I won’t be needing a co-signer this next time around. SO AWESOME!
I didn’t lock the interest rate, however, since they were quoting me 4.99% at 30 year fixed mortgage. That seemed kind of high to me, so I decided to hold off until this upcoming Monday. I also didn’t want the 40 day window to start ticking yet (after 40 days you have to pay a lock-extension if rates increase), as I’m still trying to stretch out closing for as long as possible (to help me build up more funds). The lender is targeting January 24, 2014 as the day of closing.
I’ve gone ahead and ordered an inspection, which should take place sometime in the next two weeks. Same for the appraisal. The only real catch with this property is that the lender is requiring me to come up with 30% downpayment for this purchase (not the standard 25% for investment properties). The reason? This will be my fifth rental property, and the underwriting guidelines change when you get to #5! Lenders have to be more cautious, so they require more downpayment and more capital reserves for the other rentals (6 months PITI on EACH rental!).
With a purchase price of $180,000, I will need to bring $54,000 in downpayment funds to the closing table. Further, to get through underwriting, I’ll need to factor in an additional $6,000 for closing costs, and probably a little extra to show some “margin”. So, I basically have one month’s time to hoard as much cash as possible… I’m about $12,000 short… Let the fun begin! 😉