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Spb1948, Home Buyer in 85379

My wife and I own a Home Paid in Full. We would like to Rent our Home out and buy another home. We have 30% for a down payment on another home.

Asked by Spb1948, 85379 Sun May 1, 2011

I do not work but have an income of $26,000 and my wife works with an income of $32,000. The only payment we have is our car for 400 per month. We have not credit card debt. We are not sure about renting our current home or selling it. If we sell we will take a loss of close to $150,000 we bought this home in 06 at the height of the market, but would like to upgrade to another home.

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11
Doug McVinua’s answer
Your situation sounds like it might be a great time to take advantage of the current low prices the market offers.

A few steps to consider:

Determine the rental value of your current home.

Get Pre-Qualified for your new loan.

Select a Realtor to work with.

Arizona Homes for Sale by a Guy from Iowa
Web Reference: http://www.McVinua.com
0 votes Thank Flag Link Sun May 29, 2011
My recommendation would be to speak with a loan officer prior to making any decisions. You mention 'upgrading' to a new home which leads me to believe that you are looking for a larger/nicer home. You may run into a challenge qualifying for a higher loan amount based on the amount of income you are bringing in each month, even with a significant down payment. A good loan officer will be able to show you your options. I have a couple of terrific recommendations if you are not already working with someone.

The rental market is going gangbusters right now so I think that finding a qualified tenant for your current home will be relatively simple (providing you are realistic with lease amounts of course!)

I would be more than happy to give you an estimate of the current market rental rates for your home if you feel that it would be helpful in your decision making process!
0 votes Thank Flag Link Sun May 29, 2011
The option to sell your home and take a $150,000 hit doesn't look like a good one. Renting will provide you with a lot of tax benefits, and you will get more income. You say you have 30% doen, but what is the price of the home. A lender will look at a $100,000 mortgage differently that a $250,000 mortgage with 30% down


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0 votes Thank Flag Link Sun May 29, 2011
The option to sell your home and take a $150,000 hit doesn't look like a good one. Renting will provide you with a lot of tax benefits, and you will get more income. You say you have 30% doen, but what is the price of the home. A lender will look at a $100,000 mortgage differently that a $250,000 mortgage with 30% down


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0 votes Thank Flag Link Sun May 29, 2011
Have you been able to find resolution to your question? If you still need some guidance feel free to reach out.
0 votes Thank Flag Link Sun May 29, 2011
I would recommend talking to a lender to get a sense of how much you can afford and then decide is there a home out there that you want to buy that works into those numbers. If you can rent your current home and cover your payments and you want a new home and can afford it, then with interest rates still low, why not talk to someone to see if it can work for you.

Good luck!
0 votes Thank Flag Link Wed May 4, 2011
You have a couple options. Can get a mortgage on the new home, OR do a cash out on your existing home. Either way, you should qualify solidly for a mortgage.

We are a bank and a direct lender. Give me a call directly and i would be glad to assist.

Best,
b
Web Reference: http://www.203kworld.com
0 votes Thank Flag Link Wed May 4, 2011
Please talk with a local lender to see about getting pre-approved. I cam recommend Paul Volpe, Vice President at Nova Home Loans. I have recommended to 30 clients to date & all have been happy & satisfied with results. Get pre-approved, there is no cost or obligation. Once you are, find a local agent or Realtor to help you fine tune your search.
Best of luck.
Spirit
0 votes Thank Flag Link Mon May 2, 2011
It's really your choice on how much you want a new home. There are also lots of tax questions. I'm guessing you bought your current home for cash (relatively modest income, but able to buy a home at the height of the market and 5 years later not owe a dime) and that you have a lot of cash for the new home ($26,000 in income from investments or other sources--depending on where it's invested that means you might have anywhere from $300,000 to $3 million--let's say $1 million--in cash generating that income. Thus, if you do buy a new home, how much is that going to reduce your current income of $26,000?

So, check with your financial planner on that. And determine if there's any way to boost your income on your investments--within the limits of your comfort zone. And that leads to another question: Do you have sufficient retirement savings: an IRA or 401k? If not, it might be prudent to fund your retirement first. Or, since you appear to be 63 years old (judging from your user name), make sure your wife has sufficient retirement funds. And have your financial advisor look at whether you should pay off your car.

As for whether to rent out your current home, you or your advisor can simply work the numbers on that. What would be your net income from renting? (Include management fees if you'd rather have someone else manage it.) Then look at your return on equity, and compare it to what you could get elsewhere. Let's say your other investments are returning 5%, and you're comfortable with that figure. And let's say you have $300,000 in equity in your current home. An investment of $300,000 at your comfort level of 5% would return $15,000 annually, or $1,250 a month. So, in this example, if you'd net more than $1,250 a month, if you had $300,000 in equity, and you were aiming for a 5% return, then it'd make sense to rent the place out. Your financial advisor can plug in the precise numbers.

So those are a few things to consider.

Hope that helps.
0 votes Thank Flag Link Sun May 1, 2011
Don Tepper, Real Estate Pro in Fairfax, VA
MVP'08
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Your big hurdle is going to be the car payment. Do you owe less than 6 months on the car loan? If so, they may not count it as a debt. The rental income will be counted as income which is added to the $58k that you and your wife have as combined income. They do take off 25% of the rental income for taxes, insurance, repairs, and vacancies. You need to hire a good agent as well as a good loan officer to get you pointed in the right direction. Once you know how much you can afford, you will know better what to do next. Even if you sold your home at a loss, remember that you will probably make up for that loss on the purchase end.
0 votes Thank Flag Link Sun May 1, 2011
Sounds like a plan, contact some loan officers to see if the income vs debt ratios work and if you can get a loan for some amount. You can look through the newspaper for rental homes to see what they are renting for in your area.
0 votes Thank Flag Link Sun May 1, 2011
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