Most people who ask this question really want to know if they can use the proposed/future rent as part of their qualification when they buy. The answer to this is "maybe." Assuming you are taking a conventional loan on the new place, you would then need to have at least 30% equity in the home you will be renting (so, if your current home is worth $300K, you can owe no more than $210K on it). Assuming you clear this hurdle, you might then be permitted to take 75% of the gross rental income. So, the home that's worth $300K can rent for $2000/month, for example, and the bank will permit you to take $1500 towards your future debt obligations.
I understand this can be confusing, and ultimately only a home loan professional can help you define what is possible. If I can assist in that regard, please let me know.
The new rules are also different depending upon whether you have 25% equity in the current home or not. Generally speaking you are required to have more cash reserves (cash you can access in a pinch) - sometimes it increases to 6 months instead of 2 months (or none in FHA's case).
To further confuse things FHA has potential exceptions to their rules if you are moving due to a job transfer as opposed to just choosing to move.
So, we are not trying to be evasive in answering your question. Fannie, Freddie, and FHA all have very specific written guidelines on now lenders are to treat your qualifying criteria when retaining a current residence. There are just too many "what ifs" to be able to pinpoint which will apply to you.
If you have more specific questions, feel free to post back to this forum or contact us directly via our profile. We'd be honored to help.
I am a direct lender and can give you specific answers on the exact terms and conditions of what you will qualify for. Please email or call me directly so that I can provide you with these answers
Thanks, I look forward to hearing back from you!
In some cases it is a 30% down payment, soon to be 20% down payment, depending on your finances.
FHA is usually NOT available when you already own a home.
Talk with a loan officer and you will know real quick.
Harold Sharpe - Broker
So Cal Homes Realty
California Department of Real Estate License # 01312992
RE/MAX All Stars Realty
The lender will tell you how much down payment you will need as well as price range on another home. Once you have that information we can see if there is a house on the market that you will want. If you need a lender let me know I work with several different lenders in the area or you can go to your current bank and see what they can give you an pre approval letter. We will need that to make an offer on the new home.
RE/MAX All Stars Realty
I completely agree with Lance's comment. Work this out "on paper" first to see if it's possible based on your financial situation and current underwriting guidelines.
You should be able to do this as long as you are not upside down on your mortgage on your current home.
Sounds to me like you would be moving into the new home. Often times the lenders require that it is a move up home in order to allow that. So you may be able to buy this house as a primary home if you intent to live there.
In that case you may even qualify for an FHA loan which requires at least a 3.5% of the sale price. Or Conventional Financing for which you would need at least 10% down.
Closing Cost can sometimes be negotiated into the contract.
Best thing to do would be to contact a bank or Lender to get you an analysis of your situation.
I can recommend some really good lenders that can look into this for your....
Let me know if you would be interested.
This all depends on which lender you use and your financial picture. Ask your agent to recommend a few reputable lenders so you can get a firm idea of whether you can do it or not and/or what you might need to do before being able to qualify.