Your borrower must qualify for both homes full PITI plus have 6mo reserves for each home. Preferably a DTI under 50% and a strong credit profile. Not sure if you know the full details but if you feel they are well qualified and fit this scenario, I'd be happy to help!
A simple mortgage loan pre-approval would resolve these questions but since you're asking I can only assume that's been attempted already being that wasn't mentioned.
It is true that lenders have "overlays" or additional rules beyond what FHA requires, but everything here is basic to FHA qualification regardless of lender - big, small, local, national or portfolio - none could accept this scenario if the basics are not met. If you feel something was missed in any other
preapproval(s) then feel free to ask any of us to assist in determining if your client qualifies.
Tom Stevens, Loan Officer, Flagstar Bank
Financing in 50 states
It's obvious that Paul is stating that the new purchase is an FHA loan and the old property that is being converted to a rental does not have 25% equity. This means that the borrower would need to qualify for BOTH PITI payments plus have 6 months reserves for each. It's obvious by implication that the borrower in question DOES NOT fit that guideline.
How on earth do you plan to do this? There is no "MAYBE" on this FHA guideline, it's very simple, if you don't have the equity, you cannot count the rental income.
The answers here amaze me more every day!
They will have to show income to support the current mortgage plus the new mortgage with no rental income used in the calculation.
The only way this can be done is to have a strong motivation letter from your clients, they must be upgrading property and their income must qualify with ratios under 50% DTI with both mortgages and all other debt. If you feel they have all of these, give me a shout.