Raymondx, Home Owner in South San Francisco,...

Mortgage of my So SF condo is $220K. Looking for a $500K house in dalyC/So SF, if I can rent out the condo 1st, is it easy to get a new loan?

Asked by Raymondx, South San Francisco, CA Tue Dec 14, 2010

I am single w/ $80K salary, I don't want to sell my condo now because the value dropped so much (bought it for $350K, now down to $280K). If I can rent it out, can I use the lease agreement to show the bank that I can afford for a bigger loan?

Help the community by answering this question:


How much do you owe on your current residence? This is a primary concern.

Happy funding, Rudi
Web Reference: http://www.umboc.com
0 votes Thank Flag Link Fri Dec 17, 2010

If you have not filed tax returns showing that propety as a rental you would need the following to use the rental income:
1. 30% equity in the property as evidenced by an appraisal, AVM(automated value).
Then rental income can be used if you can provide a copy of the signed lease & copy of the security deposit . The underwriter will use 75% of the gross rents

If you can't document the 30% equity, then they will count both payments against your income and they will require 6 months of the total payments for BOTH properties in cash reserves.

So, in answer to your question, rent the condo for 1 year before you buy and you shouldn't have a problem counting the income, or make sure you have the correct amount of equity and rent it when you get the offer accepted. This of course only applies if you can't qualify for both payments.

You should really have a mortgage professional look prequalify you and they can tell you what you will need ot do. If you would like my help - feel free to give me a call at 877-933-3330

Vicky Spiva
Guild Mortgage Co.
0 votes Thank Flag Link Thu Dec 16, 2010
Greetings Raymond... Happy Holidays! and congratulations on wanting to take advantage of our current real estate market in the North County.

Of course there are many moving parts and variables to your scenario....including complete debt to income ratio(to include market value rent, any cash reserves,credit scores...so forth.) What would be most advantageous for you is to meet with a very qualified and seasoned mortgage professional who can sort through the pertinient information while assessing your needs goals and expectations. Being ready and willing are great first steps then let the professionals help you determine the able part.

I owned a condo and lived in Daly city for 16 years and love doing business in the area if I can ever help...It would be my pleasure.

I hope this goal puts you on the path to Real Estate Mogul :) Have a great day Raymond Cheers Denice!
0 votes Thank Flag Link Thu Dec 16, 2010
If you already applied for a loan you probably already know about the stricter guidelines the lenders are using whenever they review an applicant. Your existing mortgage will show up on your credit report, and because of that, the lender will evaluate your income versus your outflows -- any obligation showing at a minimum 10 months of payments remaining are considered as active creditors. Obviously your mortgage will last for many months. In order for most lenders to consider one solution to this type condition they need to see proof of the solution with a history behind that (usually 12 months history). If you're planning to rent and buy at the same time, you may find some challenges in getting any lender to lend you money for that purchase, unless your income can support the payments on both mortgages -- the one you now have, plus the one you intend to get when you buy another house.

The challenge is to show the lender that your intention isn't to buy a replacement (usually cheaper) house to walk away from the upside down condo. This scenario has happened all too often, and lenders, if nothing else, are not ignorant of that potential with any buyer.

You're obviously going to have to do a bit more thinking and coming up with other alternatives and strategies, but I would do that with the help of a cooperating lender who is willing to offer you guidance and direction to that end. I work with lenders who do that. Let me know if I might be of service. In the interim, season's greetings!

J. Mario Preza, CRB
DRE 00668667
0 votes Thank Flag Link Thu Dec 16, 2010
It's my understanding that you'd only be able to qualify for a new loan if you can qualify without counting the rent as income when there is not at least 20% equity in the property that you want to turn into a rental. In other words, for underwriting purposes, they will not count the rent at all to offset the mortgage you pay on the condo unless there is equity in the condo. Thus, if you pay $2,000 for the condo and receive $2,000 in rent, they will still not give you credit for the $2,000 although you esentially break even. Even if you had the required equity, they would still not give you a dollar-for-dollar credit for rent received. I think they'd only count 75% of the rent, but I am not entirely certain about the exact percentage.
0 votes Thank Flag Link Wed Dec 15, 2010
Ute Ferdig -…, Real Estate Pro in Newcastle, CA
Hi Raymondx

You should be able to after a bit of history in collecting in rent.

Otherwise, you need to qualify for a new mortgage without the rental income.

Good luck.
Web Reference: http://Www.ruthandperry.com
0 votes Thank Flag Link Tue Dec 14, 2010
Hi, Raymondx. The mortgage on your condo will still be applied against your income. Second, since you don't have a 2 year history of rent collected on the condo showing on your 08 & 09 tax returns, you will not be able to use that rent as income. If you still earn enough from your employment to qualify with the first and w/o the latter, income wise you should be find.
0 votes Thank Flag Link Tue Dec 14, 2010
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