Also, you could indeed get credit for a portion of your rental income with a lease agreement in place since your LTV is 50% in the property you are converting to a rental.
The only thing I would add is that you will need to qualify for both mortgage payement (with no credit for rent) and you will need to have six months of reserves for the rental mortgage payment. I would be happy to explain how I put a file such as yours' together, if desired.
Perhaps your loan officer attempted to do a similar transaction in the past and it didn't turn out well/underwriter required it to be done as non-owner occupied, and they are warning you that with them it should be done as non-owner occupied in order to avoid having things changed in the middle of your transaction... so they are looking out for your interests if you decide to do the purchase with them.
If it truly will be your primary residence then there should be a way to get it done as one, if you'd like a second opinion on the details of your situation I'd be happy to discuss.
The lender will be looking for two things when addressing a departure residence:
1) Does it make sense that you would be truly moving to the new home. For example, if you live in a 3,000 square foot home in Yorba Linda worth $800,000 and are purchasing a 2BR condo for $200,000, than the underwriter will question if you are really going to live there. If the opposite is true, then clearly there would be no questions -
2) Second items is Buy and Bail - this is when a homeowner will rent their current home and have less than 25-30% equity. In this case the lender will not use the rental income as an offset to the current housing expense. If the Buyer qualifies for both homes, than this wont be an issue.
So, depending on your credit, income and savings, you should be able to buy an owner occupied home with no money down for a VA loan, 3.5% for a FHA or 20% or more to avoid mortgage insurance on a conventional loan. So, not sure what the issue is, yet, seems like it should be pretty straightforward.
The only other issue could be if your lender was qualifying you and you needed to put 25% down to meet the income and debt ratios..
if you want additional information, feel free to contact me at email@example.com
Rental income from the borrowerâ€™s current principal residence
â€¢If the net rental income relates to the borrowerâ€™s current principal residence which is being retained as an investment property, up to 75% of the rental income may be used to offset the mortgage payment in qualifying if there is documented equity of at least 30% in the existing property, as proven by the value from an appraisal or AVM, minus the outstanding liens. The rental income must be documented with:
â—¦A copy of a fully executed lease agreement,
â—¦The tenant on the lease may not be a family member, an individual with an established relationship with those involved in the transaction, or an interested party to the transaction,
â—¦A copy of the receipt for a security deposit from the tenant and for the deposit into the borrowerâ€™s account must be obtained, and
â—¦At the discretion of the underwriter, a fair market rent letter may also be required.
â€¢If the borrower is retaining their current principal residence as an investment property, but does not have at least 30% documented equity in the property as outlined above, the rental income may not be used to offset the payment. In other words, you must be able to qualify for the payment on the new property and the payment on the current property without any offsetting rental income.
If you would like to contact me for a pre-qualfication you can reach me at:
Happy funding, Rudi
Second, since you have 50% equity in your residence, you might also want to look into using a portion of it as cross-collateral, and that might lower your down-payment amount.
When I counselor with new clients, I reccommend they check for a loan several places.
1- your own bank and credit unions
2- a direct lender being BofA, Wells Fargo etc
3- a mortgage broker which has a wide variety of loans than a direct bank.
This is before you give them your credit information, tax returns, etc.
The mortgage brokers depending which one you use has many packages of loans and you both decide which would be best for you. This is what you have to do first before looking at homes to buy. You want to know what you qualify for and what payment that would be and then you decide how much of a house you are comfortable in buying..
I would like to interview for the job in working with you in finding your home in Yorba LInda.. This is a great area. I have lived and worked in this city along with Anaheim HIlls, Placentia and Brea..
Talk to you soon,
Ingrid Ski Realtor
949-874-0432 Cell & Text
Are you moving closer to work or further away?
If I'm reading your question correctly, your new home will be over 50 +/- miles away from your current home which would make it a little more acceptable.
If your new home will be further away from your employer, I can see an underwriter having an issue with the new home being considered your primary residence.
Feel free to contact me if you would like another opinion.
Realtor Since 1996
Main Street Realtors
Of course, there may be qualification problems. Most lenders require a genuine rental contract on the current residence and only a percentage of the rent is counted for qualification purposes as a vacancy factor must be considered. If your income and credit is sufficient to qualify for both houses ... there is no problem at all. But, It might be a bit more involved if the lender needs to consider the rental value.
If you are going to live in this new home on a permanent basis ... why would you not want to take advantage of
fantastically low fixed rates? 4.25% is a wonderful rate!!! Of course I don't know your situation and motivations ... but I do not understand why you would opt for an ARM that will ultimately wind up much higher?
I have lived in Yorba Linda since 1972 ... would love to help you find your new dream home!
Prudential CA Realty
Let me know if I can be of any help in your property search. I can also refer you to a loan broker if you need.
Thanks and good luck.
I am not a lender but I use a lender that I feel is the best in this area. He has more than 25 years experience as a mortgage person. I think that your thinking is spot on. Now is a good time to buy investment property. I have lived here in Yorba Linda for 38 years and still do. Raised my sons here. It is a wonderful area as you know. I could give you my opinion of the answer to your question but you would be better served by a professional in the lending business. Should you wish to speak with me, and I hope you do please email me at firstname.lastname@example.org.