Financing in Indianapolis>Question Details

Brenda, Both Buyer and Seller in Indianapolis, IN

I want to buy a new house and rent my current one and I am getting conflicting information. One lender told me as long as I have a lease on the

Asked by Brenda, Indianapolis, IN Mon Feb 8, 2010

current one, he can get me approved for a new mortgage, another one is saying that I need at least 25% equity in my current own before I can claim rental income to get a new mortgage. They both swear the other person does not know what they are talking about. Who is right?

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11
Hi Brenda,

There are only a few ways "around" the Fannie Mae/Freddie Mac buy and bail guidelines which state that the only way to use the rental income to offset the mortgage payment is if you have 1 of the following.

1) A history of receiving the rent, documented by tax returns
2) 20-25% equity in the rental property.

Most lenders have applied these guidelines as overlays to FHA and VA mortgages as well.

FHA may allow the use of a lease agreement if you fall under one of the exceptions. For example, if you are transferred or have to relocate for work.
1 vote Thank Flag Link Mon Feb 8, 2010
Does anyone know if this applies to credit union loans? or do they not go buy the fannie rules?
0 votes Thank Flag Link Thu Jun 23, 2011
thanks for all your input John...I truly appreciate it.
0 votes Thank Flag Link Mon Feb 8, 2010
According to their site, they are a private direct lender so they may be able to do what the loan officer is saying.
If you're still unsure you may want to call and speak to a manager.

Good luck!
0 votes Thank Flag Link Mon Feb 8, 2010
I think he is direct lender...here is a link to their website
http://www.cmcloans.com/
0 votes Thank Flag Link Mon Feb 8, 2010
I was hoping to get the lenders name just to follow up on their programs. Are you dealing with a broker or a direct lender?
0 votes Thank Flag Link Mon Feb 8, 2010
I cannot disclose the broker's name but he is with Century Mortgage here in Indianapolis.
0 votes Thank Flag Link Mon Feb 8, 2010
Hi Brenda,
Conventional mortgages are generally sold to Fannie/Freddie so unless this lender is going to hold and service your loan they still have to underwrite to Fannie/Freddie guidelines.
Who is the lender that is saying they can do this?
0 votes Thank Flag Link Mon Feb 8, 2010
I know that's a Freddie/Fannie/FHA rule...does it still apply although I am getting a conventional loan? One lender said they have their own mortgage company and can approve it without the 25% equity especially because it's not an FHA loan but a conventional one.
0 votes Thank Flag Link Mon Feb 8, 2010
Hi Brenda,

John did a good job giving you some clarity. Unless one bank is holding onto your loan, you would need at least 25% equity in the house if you are a first time landlord. Thats a fannie/freddie/fha/ rule. John gave you a good idea of how to get around of it if you can...
0 votes Thank Flag Link Mon Feb 8, 2010
Brenda:

When you made the decision to rent your current house and buy a new one to live in, your current home became investment property. How investment property income is treated for purchasing a new home you will occupy varies from lender to lender and loan product to product, whether your new loan will be conventional, and whether the lender you use will sell the loan in the secondary market or portfolio the loan. You need to have a clarifying conversation with each lender. (Loan guidelines can vary from lender to lender.)
0 votes Thank Flag Link Mon Feb 8, 2010
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