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Kic02, Home Buyer in Fresno, CA

i owe a house already- looking for a second houe.I want to rent out the first house. Is that possible?

Asked by Kic02, Fresno, CA Tue Jul 5, 2011

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Scott Godzyk’s answer
It is possible, A loan officer can easily expain to you how the process works. They will look at the expense and rental income from the current home and add that to your ratios and income. Start with a local and trusted loan officer who can easily prequalify you.
0 votes Thank Flag Link Sun Nov 11, 2012
Kic02, Absolutely yes it is possible...with a fair number of caveats. I just closed a loan for a client a couple months ago in the same situation (in this case it was a VA, but FHA and conforming will work also). There is specific criteria for every lender and each loan product; however, by and large the following will need to be evident (and/or addressed):

1). Value of your current home as compared to outstanding loan balance. Lenders are extremely wary of strategic defaults (walking away from the debt obligation because the property is underwater) and are concerned you will buy a new, nicer home in your area and then default. Therefore, value AND your motiviation need to be addressed in the loan proposal (this is above and beyond the actual application).

2). In most cases you will need to qualify for both mortgage payments without credit for any rental income. This CAN vary if you have at least 25% equity base in your current residence and/or you have other rental properties showing experience of being a landlord on two years tax returns (I am assuming not, per your question.

3). Most lenders will require six months reserves; however, I only needed six months on the proposed rental property...NOT both.

4). Motivation is as key to success as qualifying; particularlly if you are planning to buy in the same neighborhood and school district. Which, by the way, was the case of my clients. It can be done quite handily; however, the lender needs to be given the documentation and understanding of the goals of the borrower as well as the analysis of numbers on the file.

Of course, I would be happy to answer any questions you may have if you would like to contact me.

Deborah Garvin
(619) 787.821
NMLS 279125
0 votes Thank Flag Link Wed Jul 6, 2011
Yes, it is definitely possible, but the banks are gun shy about this so you will probably need to qualify for both mortgages and possibly need six months of reserves (payments) for each home.
0 votes Thank Flag Link Tue Jul 5, 2011
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