There are all types of quirky rules like that on this topic. Gather up all of your support documents and then meet your loan officer face-to-face and review everything. Only then can you feel safe moving forward. Inspections, appraisals, etc. are expensive mistakes if you do not meet all of the requirements. Good luck,
NMLS # 6395
Financing Kentucky One Home at a Time
I would recommend taking a HUD approved landlord class as well. Sometimes being a landlord isn't a bed of roses.
Mortgage Counselor - NMLS 280951
Best of luck.
I have been a Mortgage Banker in a past life so sometimes I throw my 2 cents out there even on situations I don't deal with right now.
Mortgage Banker - NMLS 280951
Since we don't know anything about the value of the house you are living in, or how much your current loan balance is, we can't give you a specific answer here in this forum. You will need to contact a highly experienced Realtor to go over the numbers with you.
Let's assume your house is worth $100,000, and you bought it several years ago. Perhaps your monthly payment is as low as $700. And in today's market, I can rent it for $1,000 a month. The new lender will look at your lease contract and take 70% of the incoming rent money as an offset toward your mortgage payment debt. Since 70% of $1000 is $700, and that equals your monthly payment, it's a wash! Which means the debt of $700 a month is not held against your qualifying ratio as a car payment would be.
.So now, all you have to do is qualify for the amount of the monthly payment on your new loan. And once we work out those numbers, then you will know what size of a house you could buy. Once I show you where those houses are located and how large they are, you can then decide if you want to make a move. As you can see, there is a lot to consider before you go out and drive around looking at houses.
Contact me on Monday and we'll go over your specific situation with you in more detail.
Have a nice evening!
ULTRA Real Estate Services
Either way, you will need to qualify for the total of all mortgage payments, just one way you'll be able to have some offsetting income.
I believe these rules are mortgage related and so nationwide in nature, though as other have mentioned on here, you ought to talk to a good and trustworthy lender for absolute confirmation.
Mr. Felan is offering a monetary rebate if some buyer would only call him. It is a bit fuzzy as to what that amount would be, since he says "$500--$1,000 out of my commission." Which is it George? $500, or $1,000?? There is a big difference. This implies that there are some restrictions on his offer, and you would have to call him to find out what they are. This is a blatant violation of the rules for advertising as published by the Texas Real Estate Commission. ALL restrictions must be published in such an advertisement.
Mr. Felan states in his ad that the closing price of the house must be above $100,000. There are many good rental property candidates that are priced below $100,000 in today's market, so that must mean that you wouldn't get any rebate if you were buying one of them through him anyway.
He also states that you (the buyer) must purchase a house from "an individual." And then goes on to rule out "Short sales." So even though the house is sold by an individual in a short sale scenario, you would not get his rebate. Perhaps his two degrees did not educate him to the fact that the homeowner is selling the house in a short sale transaction, and not the bank! Those ever so powerful degrees, (which, by the way, are not in real estate), also did not help him to spell "foreclosures" properly. But we will conclude that you would not get his rebate if you were buying a bank-owned property for your rental portfolio.
Aren't the "best deals" in today's market going to be foreclosed properties? So you would not benefit from Mr. Felan's rebate if you were buying a good deal in today's real estate market, regardless of the price. ...And then he goes on to provide a link to a Justice Department web page, as if that would lend some credibility to his offer. It is interesting to note what can be found on that web page: Some states have banned (outlawed) the offering of a rebate to customers. (Maybe the others will soon follow.) One of the quotes from that page says: "If inducements (rebates) were allowed, they could lead to......behavior which would make us look unprofessional in the eyes of the public."
That is exactly what you are doing, Mr. Felan. Your ad sounds unprofessional. You didn't answer the person's question. Perhaps you don't know the answer. You were just waving a $500-bill in front of everybody, praying that a buyer would call you based on that ad. ~Most buyers would not choose the $500 savings over hiring an experienced Realtor. Most buyers don't give a hoot where you got your degree, or how many degrees you have. Most buyers are looking for a professional to represent them when they engage a Realtor, and they want someone with experience and a track record in Real Estate. They are not impressed with a degree in Education.
I would invite other Brokers to respond to this issue. This is a public forum, so throw your opinions out here. Thanks to all of you in advance!
ULTRA Real Estate Services
---helping people sell Tarrant County, ...one house at a time...
Lynn911 Dallas Realtor & Consultant, Credit Repair Advisor
Multimillion Dollar Sales Producer
Follow me on Facebook
After reading all the previous answers, you may still be a bit confused. (Especially when people write in from out-of-state, not knowing the laws in Texas.) First, let me say it depends on what you are trying to do; and second, it depends on the lender. Since I am not a mortgage broker, I can just tell you what I have seen over the past 32 years. And then you have to realize that ALL mortgage lenders have changed their rules for underwriting in the past year or two. But you will find that some lenders will make the type of loan you are looking for and some won't. When you contact me, I will put you in touch with one who will.
But they are going to ask about what you are trying to do first. Are you trying to buy the second house right away; move into it at your leisure; and then find a tenant for your first house? IF that is your plan, you will need to qualify for two loans at once. There is no restriction on owning two houses; one can be your homestead, and the other can be a vacation home. You would have to make enough money to carry both mortgage payments based on your income-to-debt ratio. Few people can do this, but if you have an exceptional income and no other debts, it might work. (It depends on the price of the house.)
It will be a lot easier to accomplish if you rent the first house to a tenant, and then go out and buy your second house which will become your homestead. In this type of a scenario, the lender may not hold the first mortgage payment against you as a total debt. They may be willing to give you some credit for the rent as "income" to offset the debt of the mortgage payment on the first house. So now the math kicks in, because it depends on the size of the first mortgage payment vs. the amount of rent you can get in today's market. (You need an experienced Realtor to evaluate that for you even before you call a mortgage company.) Some lenders will give you a credit for about 70% of the rent money.
So now it becomes a question of convenience. (Nobody said becoming a Landlord would be easy!) You are probably thinking that you don't want to move out of your first house BEFORE you can buy the second one. Well, you may have to move twice to make this scenario work. You could rent an apartment for a month, for example. (You don't have to sign a one-year lease.) But many times in the past, I have assisted someone who wanted to do exactly what you are trying to do without them renting an apartement. You would have to present the lender with an executed lease agreement between you and your new tenant. In the good old days, we used to give the lender a "signed copy" of a lease. But in today's world, they will verify that you have a live tenant on the other end of the transaction. So before you can close on the second loan, you will have to present them with a tenant for your first house. This is not impossible, and I can show you how to do it.
Obviously, Timing is the key factor involved here. We can have a house standing by for you to purchase it, while we advertise for a tenant to take over your first house. The new tenant will have to be understanding and patient while we get your new loan approved. The key here is to have your second loan PRE-approved. That way it won't take us long to actually close on a house. --It would be ideal if you could rent your house to a relative or close friend, as they might be more understanding of the situation.
Ok. --Long answer. --But you asked a question about a complicated situation. When you get in touch with me, we will sit down and go over the numbers in detail, and I can show you exactly what the lender is going to look at -- even before you call a loan officer. You are very wise to start this project. Eventually, you will become a seasoned Landlord, and you can build up a repertoire of properties which will give you a solid retirement income. Soon, you will become a millionaire on paper!
Good luck to you!
ULTRA Real Estate Services
Best of luck to you.
REALTORÂ® | Mortgage Broker
Keller Williams Realty | 360 Lending Group
o 512.669.5599 m 512.633.4157
firstname.lastname@example.org | http://www.AustinListed.com
Take the good advice of the others, but when ready to buy give me a call. Use me as your agent and I will pay you a cash rebate of $500-$1,000 out of my commission!!! Restrictions are that the house must close above $100,000 and must be sold by an individual ( no forclosures, short sales, etc).
I am a twice degreed professional (TCU & UNT) ready to represent your best interests.
For information on how rebates are good for consumers, please see:
Will be awaiting your call or e-mail!!!
George D. Felan
Realtor, Ready Real Estate
Great question! As others have said you definitely want to consult a loan officer for your specific situation. Generally speaking though there a few rules of thumb for you with purchasing additional property and holding on to the old one as rental property.
Cash to put down- Lenders are going to want to you to have an increased equity stake in the new home you intend to buy.
Cash Reserves- The lender will want you prove that you have cash reserves to cover vacancy in your rental property,
Debt to income Ratio- You will need to to have a debt to income ratio that supports both the new mortgage and the old mortgage as well and all debts. The lender also may not factor 100% of the rent as income, this amount may be reduced to factor a vacancy period between tenants.
There are additional items but these are the main three that really stop many potential investors. If you have additional questions or I can be of any service please feel free to contact me directly. Best of luck to you!
Keller Williams Realty