Home Buying in Perris>Question Details

Mmelero, Home Buyer in Perris, CA

My husband and I own a home, however I am interested in renting out our current home and purchasing another home. What would be the requirement?

Asked by Mmelero, Perris, CA Tue Jan 18, 2011

What i am interested in knowing is what would the down payment be,closing cost or any other factors? Thanks

Help the community by answering this question:


Contact your bank or any lending company to determine your qualification to buy a new home.
0 votes Thank Flag Link Tue Feb 21, 2012
You need to contact a lender to verify what you would qualify for. Typically in a situation like yours you have a couple of options. No matter what type of financing you choose you are going have to show 30% equity in your existing home. You will more than likely need a signed rental agreement on your current residence prior to purchasing a new home, depending on your income. You may or may not qualify for a low down payment loan. Again, the financing is dependent on your existing home and finances. My suggestion is to contact a good lender with a complete explanation of what you want to accomplish and see how the numbers work out.
0 votes Thank Flag Link Wed Jan 26, 2011
You may to qualify for your new loan with payments from both houses, the old and the new.
0 votes Thank Flag Link Tue Jan 18, 2011

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.

Thank you,

Rob Spinosa
0 votes Thank Flag Link Tue Jan 18, 2011
Mmelero - it's impossible to answer your question with just the information provided. Fannie Mae, Freddie Mac, and FHA have all come out with guidelines that make it tougher to retain your current residence while moving to a new home. That does not mean YOU can't meet those guidelines, but they are more restrictive then if you did not retain your current home.

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.
0 votes Thank Flag Link Tue Jan 18, 2011
Hi there
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!

Kim Clancy
Pinnacle Mortgage
Direct: 877-503-8225
Cell: 949-933-9058
Email: kclancy@pinnacle-mortgage.com
0 votes Thank Flag Link Tue Jan 18, 2011
Hi Mmelero,
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
(951) 821-8211
California Department of Real Estate License # 01312992
0 votes Thank Flag Link Tue Jan 18, 2011
That again will depend on what type of loan you are getting. FHA is 3.5% down, Conventional is between 10-20% down. Closing costs are about 5%. These could be better answered by a lender that you can trust to keep your financial information secure.

Karen Whitman
RE/MAX All Stars Realty
Web Reference: http://www.karenwhitman.com
0 votes Thank Flag Link Tue Jan 18, 2011
We would need to determine thru a lender if you would qualify with two houses. You need to know how much rent you can expect to receive for your home and you may need to have a tenant ready to move in.
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.

Karen Whitman
RE/MAX All Stars Realty
Web Reference: http://www.karenwhitman.com
0 votes Thank Flag Link Tue Jan 18, 2011
As others have said, talk to a lender and I would also recommend you speak with an accountant or a tax attorney. There will be tax implications by converting your current home to a rental. (you'll have to claim the rental income on your taxes). And in order to buy the new house, you'll need enough money for a down payment and closing costs. On top of that, you'll have to show enough income to cover both mortgages. Years ago you were allowed to include rental income, but they won't let you do that anymore. Good luck!
0 votes Thank Flag Link Tue Jan 18, 2011

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.

Best, Steve
0 votes Thank Flag Link Tue Jan 18, 2011
Hi Mmelero,

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.

David: marquezhomes@gmail.com

0 votes Thank Flag Link Tue Jan 18, 2011
Lance is correct. You need to find a good lender and ask them for the qualifications. some banks are getting very leery of folks wanting to do this (of claiming to) when they really don't have a tenant in place and are planning to walk away from the 1st house. not saying that applies to you, just letting you know what they are thinking.
0 votes Thank Flag Link Tue Jan 18, 2011

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.
0 votes Thank Flag Link Tue Jan 18, 2011
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