Home Buying in San Juan>Question Details

Melinda, Both Buyer and Seller in San Juan, TX

my husband and I want to buy a new house and rent/sell our first home. Is there any need to know info when?

Asked by Melinda, San Juan, TX Tue May 27, 2008

purchasing a second home, is this seen as negative in today's market?

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Melinda, if you think rent might be too high for the area in which you live and your chances of getting a reliable renter is slim, you can consider seller financing your current home and ask for a down payment from the buyer and set an interest rate. During these times, buyers are having trouble getting approved for mortgages but this doesn't mean you can't sell your home to someone that might have a good down payment and less than perfect credit. I would suggest you consult with a good real estate attorney to get this set up for you. Don't lose sight of your dream home. There are many options for you to consider!
0 votes Thank Flag Link Wed May 28, 2008
Melinda,
If you are still making payment on your present home you may be required to lease it out in order to qualify for the loan amoumt you want on your next home. If you are lucky enough to contact an agency that can guarantee you a lease for a certain amount it will be a plus mortgage wise.

Happy House Shopping

Margaret
0 votes Thank Flag Link Wed May 28, 2008
It's an outstanding way to start to build your net worth... as long as you are making that decision for that reason (not because you can't sell your current home and are hoping to rent it out to make a quick fix)
Web Reference: http://www.exposedhomes.com
0 votes Thank Flag Link Wed May 28, 2008
That's a neat way to get started buying investment properties. One thing you want to do if this is your plan is check with your lender to ensure this is financially feasable. Even if the rental payments will cover the mortgage, often they will only give you a certain percentage, say 75% of the rent as credit as a safety precaution for the lender. They want to make sure you can cover both payments if needed for a certain amount of time, for example if there are vacancies or missed rental payments. Also I would only do this if that is your real intention....that is to say that you really want to get into the real estate investment business. I see some people do this because they can't get the price they want for the home, or they don't want to spend money to repair certain items that would be required in a sale. These to me are not good reasons. If it is a long term investment you need to make the repairs. You also need to be very geared up to handle all the problems that come with renters....phone calls, missed rent, late rent, evictions, repairs, etc. I think it is worth the hassel but not all people do.
Web Reference: http://www.teamlynn.com
0 votes Thank Flag Link Wed May 28, 2008
Bruce Lynn, Real Estate Pro in Coppell, TX
MVP'08
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Melinda, Do go ahead and check with a Realtor and a mortgage broker, but also check with a property manager to ensure that the property would have no problems renting and that the income would coincide with what you are expecting.
I have many clients that have done what you are doing, and they are on to their fifth and sixth home, ensuring themselves a healthy retirement income and more financial stability than your average person. My typical client rents a home for about 1% per month of what it would sell for (though that is fairly aggressive in todays market) and then gets the increase in equity.

Good luck!
Web Reference: http://www.ChrisTesch.com
0 votes Thank Flag Link Wed May 28, 2008
Melinda,
Since your primary residence will become rental, you should check your mortgage agreement with a lender. Probably there is stated that if your primary residence becomes rental you will be in breach of contract and they might call the loan due. I do not think that this will happen with all going foreclosures, because they have better things to do right now then to check what primary residence just became investment property.
0 votes Thank Flag Link Tue May 27, 2008
There are ways to work around a second home purchase. Great to start your questions prior to jumping in on a purchase You need to discuss your short and long term goals with a seasoned real estate agent and a mortgage broker.

http://www.lyn911.com
0 votes Thank Flag Link Tue May 27, 2008
Melinda,

Depending on your equity situation in your current home, and how much you intend to put down on your second home, you may or may not run into lending issues. Some concerns are:

Will you have your existing home rented before you purchase your second home. If not, then you'll likely have to qualify for the second home under the assumption that you have no income from your existing home and the full payment will be factored into your total payment ratios.

If you have a lease signed for your existing home, the lenders will typically only consider a portion of the lease payment as offsetting to your current monthly payment for it. I've seen numbers from 50 to 75% of the lease payment applied towards your monthly payment in determining your debt ratios.

There's no real negative to be concerned about from anyone's perspective but your own. That is, how comfortable are you that you can rent out your home to a consistent and long term tenant? How comfortable are you should you have an interruption in rental income? Do you have the resources to manage the existing home once it becomes a rental.

Try to find an agent who has experience dealing with rentals, when you search for someone to help you buy your second home. They should be able to provide good advice on the ins and outs.

Good luck,

Jeffrey
0 votes Thank Flag Link Tue May 27, 2008
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