Financing in 08081>Question Details

J_will1535, Both Buyer and Seller in Alpharetta, GA

Is it difficult to get approved for 2 mortgages (rent out current, buy new)?

Asked by J_will1535, Alpharetta, GA Tue Feb 5, 2013

I own a house that is underwater currently and need to move due to a job change. I don't want to sell the house and have to take a ton of $ to close. 1. Does rental income qualify in the mortgage qualification process? 2. What credit score is needed? 3. Can I get a 2nd FHA loan or will it have to be conventional?

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J_will, thanks for the additional info. 20 miles would be considered within the same commuting area, so unfortunately it wouldn't qualify under the exception rules to get a 2nd FHA loan nor use the rental income from the home you are vacating without having the required equity. Conventional financing would be your option, however with conventional financing & when you don't have the 30% equity in the home you are vacating then you cannot use it's rental income to qualify and plus you'll need 6 months PITI reserves (available checking, savings, 401k, etc. after you close) for both the existing mortgage payment + the new one. So if your income can qualify for both payments (you never know until the payments are run) you could be OK to qualify. But if you can't qualify, then what you can do though, is you could move out of your current home and rent a place nearby your family, then rent out your old home, claim it on your 2013 tax return, and then in early 2014 you could purchase (with conventional financing still) but you'd be able to use the rental income without having the required equity (because it would no longer be a "departing residence") and wouldn't need to have the 6 months PITI in reserves. A few of my clients have done this, and while it's not an immediate solution, it gets it done down the road.

Shane Milne | Lending in all 50 states | NMLS #81195
shane@thebesthomeloans | 949-273-4161 direct
0 votes Thank Flag Link Wed Feb 6, 2013
What would I need to put down in order to qualify for conventional? If it's 5 or even 10% I could do it and still have 6months in reserve. 15-20% would put it out of reach.
Flag Sat Feb 9, 2013
J_will, you are welcome. Yes the adoption subsidy should be able to be used to qualify, as the requirement for that type of income is that it just needs to continue for at least the first 3 years of the mortgage. A copy of the terms of the adoption income would be needed to document that. I'd recommend you send me an email so we can go over what your other monthly payments are, and some estimates for property taxes/homeowners insurance on the new purchase so we can determine if you'd qualify with & without the aid of the additional rental income. If you are relocating to a new area not within reasonable commuting distance of your current home, then with FHA financing there is no requirement for you to have 25% equity in your departing residence (it's an 'either/or' situation, so you need to be relocating to a new area OR have 25% equity). Conforming financing on the other hand requires 30% equity to use the rental income from the departing primary residence, there is no other exception for relocating.

Shane Milne | Lending in all 50 states | NMLS #81195
shane@thebesthomeloans | 949-273-4161 direct
1 vote Thank Flag Link Tue Feb 5, 2013
Thanks for the additional info. 20 miles would be considered within the same commuting area, so unfortunately it wouldn't qualify under the exception rules to get a new FHA loan nor use the rental income from the home you are vacating. Conventional financing would be your option, however when you don't have the 30% equity in the home you are vacating then you cannot use it's rental income to qualify and plus you'll need 6 months PITI reserves (available checking, savings, 401k, etc. after you close) for both the existing mortgage payment + the new one. What you can do though, is you could move out of your current home and rent a place nearby your family, then rent out your old home, claim it on your 2013 tax return, and then in early 2014 you could purchase (with conventional financing still) but you'd be able to use the rental income without having the required equity (because it would no longer be a "departing residence") and wouldn't need to have the 6 months PITI in reserves.
Flag Wed Feb 6, 2013
Ah, distance may be an issue. I'm traveling with the new job and that is what is prompting the urgency of wanting to move. However, what we are trying to do is move into the same town as family so she and the 4kiddos have support while I'm on the road. It is only 20 miles or so. Does that count?
Flag Tue Feb 5, 2013
If you have an FHA loan and you rent it out for 18 months or more and later you decide to try to short sale.... You will be denied! No ifs ands or buts!

You said you are underwater... You can short sale and buy another home immediately... with restrictions. One of the requirements is a distance factor another is you have to be current on your mortgage...



Search Short Sales and foreclosure Deals at http://www.BuyNjShortSales.com

Larry Sarlo
RE/MAX Preferred
609-868-1171
lsarlo@comcast.net
http://www.larrysarlo.com
0 votes Thank Flag Link Sat Sep 21, 2013
J_will1535 - for conventional the minimum down payment is 3% (you'll need a 680 score) or 5% (620 score). The better the score, the better the interest rate, as conventional financing is very credit score sensitive.
0 votes Thank Flag Link Sat Feb 9, 2013
Every lender has different underwriting guidelines, however, I will say most will weigh both your current and new payment against you...UNLESS...you were do close on the sale of your current home prior or simultaneously to your new purchase OR if your current property is equal to or less than 75% LTV (loan-to-value) which would be determined by an appraisal OR with some lenders, a 1 year lease agreement is provided in which case you could use the rental income. I would definitely go with the last option as you've stated you have no intention to sell nor does your home have the required equity mark. If you're relocating a reasonable distance than yes you would be able to acquire another FHA mortgage. Also, the subsidy can absolutely be used to qualify as it will be received for greater than 3 years; you would just need to show supporting documents. If you'd like to discuss your options in greater depth please contact me at your earliest convenience.


Kindest regards,


Paul Marzolla
Loan Officer
Direct: (201) 957-6768
Office: (201) 203-2266
pmarzolla@unvmortgage.com
NMLS#922891
0 votes Thank Flag Link Wed Feb 6, 2013
Do you have to purchase using FHA?

This always comes up especially today with their high charges.
FHA will allow you do another FAH loan ... Done them within my local area also. "Rule of thumb" approx 35miles as I have been told...and make sense... such as closer to transportation or job or family reasons etc.

Are you really wanting to rent your home...?
I know you are underwater.. But did you know you could short sale and buy another home immediately?
If you cant use the rental income since you have no history of rental income on the property, this could be a way out for you.

Renting a home is fine while the income is coming in, but it sounds like you are going to be far away to manage...

Search foreclosures and short sale here: http://www.BuyNJShortSales.com

"Nobody Sells More Real Estate than RE/MAX"

Search the MLS on your phone by Text: In the subject line on your mobile phone- LSAR1 -to number 87778 ... hit send... A GPS feature for listings at your finger tips

Larry Sarlo When you want it Sold Fast!
RE/MAX Preferred
609-868-1171 call / text / email 7 days
lsarlo@comcast.net
http://www.larrysarlo.com
0 votes Thank Flag Link Tue Feb 5, 2013
You should be able to use the subsidy.

What I would recommend is making a formal loan application, so all liabilities can be reviewed as well all other aspects of your situation and most importantly run an automated finding. Email me at tony.garcia@everbank.com so we can discuss further.
0 votes Thank Flag Link Tue Feb 5, 2013
Appreciate the info!
Another possibility that I hadn't thought of was an adoption subsidy we receive monthly (for another 10yrs) from the state - we are saving it for their college tuition but it could help in the underwriting process if that counts as income. Do you know if it counts? Credit score is 675ish, current mortgage is 2175, annual salary is $130k + $15-60k in annual bonus. We'd need $375k to get into the house we're hoping for.
0 votes Thank Flag Link Tue Feb 5, 2013
If you do not have between 25% to 30% in equity you can not use the income of your departing properyt to offset the payment you need to qualify carrying both mortgages (unless you are VA eligbel).

since you are relocating due to job change you can obtain a new FHA mortgage. minimum credit score varies from lender to lender on FHA. mine is 620. FHA will also be flexible with your debt to income ratios (since it sounds like you will need to qualify carrying both mortgtages) i have closed FHA loans as high as 57% back ratio. I hope this helps, feel free to contact me with any additional questions.

tony.garcia@everbank.com
0 votes Thank Flag Link Tue Feb 5, 2013
Shane's answer is correct and very thorough. I have also worked with a lender who was able to do this for a couple of my recent clients, and they were NOT relocating. Give me a call or email if you would like to have a referral.

Best wishes!

Kimberly Thomas,
Broker-Associate
Brown & Pope Realtors,
2105 Voorhees Town Center
Voorhees, NJ 08043
856-308-5989
http://www.activerain.com/voorheesbroker
email: kim@kimcanhelp.com
0 votes Thank Flag Link Tue Feb 5, 2013
It is my understanding that you need to be considered a 'property manager' in order to use the rents as income to qualify for a new loan. You need to have a proven record that your investment properites are in good standing.
0 votes Thank Flag Link Tue Feb 5, 2013
1. If it has been filed on your taxes for 2 years or 12 months with a current lease agreement depending on your lender and programs. 2. The higher the better. 3. Under certain circumstances. Example: if your new employment is not within a reasonable commute from the current primary residence.
0 votes Thank Flag Link Tue Feb 5, 2013
Yes, if someone is relocating to a new area not within commuting distance of their current home, then they can purchase the new home with FHA financing (even if they already have an existing FHA loan they are moving out of), and when using FHA financing for the new purchase then rental income from the home they are moving out of can also be used to qualify as long as there is a rental agreement that spans at least the first year of the new mortgage & evidence that they have collected the 1st months rent and/or security deposit (even if they are upside down). FHA just requires a 500 credit score, however the majority of lenders that offer FHA financing will be looking for a 620 or 640 credit score (we require a 620).

FHA's guidelines specifically say:

A borrower may be eligible to obtain another FHA-insured mortgage without being required to sell an existing property covered by an FHA-insured mortgage if the borrower is
· relocating, and
· establishing residency in an area outside reasonable commuting distance from his/her current principal residence.
Note: The relocation need not be employer-mandated to qualify for this exception.

&

When a borrower vacates a principal residence in favor of another principal residence, the rental income may be considered in the underwriting analysis, under the circumstances listed in the table below:

Relocations The borrower is relocating with a new employer, or being transferred by the current employer to an area not within reasonable and locally-recognized commuting distance.
A properly executed lease agreement (that is, a lease signed by the borrower and the lessee) of at least one year’s duration after the loan is closed is required.
Note: FHA recommends that underwriters also obtain evidence of the security deposit and/or evidence that the first month’s rent was paid to the lessee.

Shane Milne | Lending in all 50 states | NMLS #81195
shane@thebesthomeloans | 949-273-4161 direct
0 votes Thank Flag Link Tue Feb 5, 2013
You are welcome. Yes the adoption subsidy should be able to be used to qualify, as the requirement for that type of income is that it just needs to continue for at least the first 3 years of the mortgage. I'd recommend you send me an email so we can go over what your other monthly payments are, and some estimates for property taxes/homeowners insurance on the new purchase so we can determine if you'd qualify with & without the aid of the additional rental income.
Flag Tue Feb 5, 2013
Appreciate the info!
Another possibility that I hadn't thought of was an adoption subsidy we receive monthly (for another 10yrs) from the state - we are saving it for their college tuition but it could help in the underwriting process if that counts as income. Do you know if it counts? Credit score is 675ish, current mortgage is 2175, annual salary is $130k + $15-60k in annual bonus. We'd need $375k to get into the house we're hoping for.
Flag Tue Feb 5, 2013
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