Own a condo. Want to buy a family home

Asked by madstarmodel, Las Vegas, NV Sun Sep 23, 2012

My boyfriend and I own a condo that we bought this year in March, we paid cash so we have no mortgage. The Zestimate (Zillow) value of condo says that we have 15k in equity since the purchase. We want to buy a brand new family home that is 300k, can we use equity as down? Will the lenders consider that we will rent the condo out and use that as monthly payments? And can we still get a FHA loan together? What are my options? Thank you

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Myra Gouger’s answer
Myra Gouger, Agent, Las Vegas, NV
Mon Sep 24, 2012
The bank can't use the rental income to qualify you for a mortgage because you don't yet have rental income. You have to show that you have had this as an income stream for at least 2 years. Also, don't rely on the Zillow estimates. They are usually quite high. If you were to sell the condo now, you might just break even or even lose money. As the seller you are responsible for the transfer taxes and other things when you sell. You would have to qualify for the new home with your current incomes, tax returns and cash on hand. Speak with a mortgage professional before you do anything. Find out what you are pre-qualified for, if anything.
1 vote
Alvin King, Agent, Las Vegas, NV
Sat Jan 31, 2015
I am sure that you have received information from many different sources, but the fact is; you are not currently receiving income from the condo, so it is A debt that must to be acknowledged. Prior to any decision made, contact A Mortgage professional. Good Luck! If you need more information, click the contact button, located near my name. Good Luck!
0 votes
, ,
Mon Sep 24, 2012
David, I'm sure you know more about condo prices in Las Vegas than I do. But it may also be a detached condominium, aka a site condominium which looks like a house (I've seen plenty of those in Las Vegas, Henderson, Boulder City), or it could be in a high-rise, etc. What I am saying is that there are various condo price points depending on what is owned. I was just laying out guidelines on what is needed in anyone's situation where they are trying to use rental income from a departing residence while using an FHA mortgage to purchase their new home. I wouldn't want to assume madstarmodel's condo is on the lower or upper end of values without more information from them. Hopefully they'll respond with further details, but if not then I'm sure they found the information they were seeking.

Shane Milne | Lending in all 50 states | NMLS #81195
0 votes
David Cooper, Agent, Los Angeles, CA
Mon Sep 24, 2012
Shane. The value of condos in Las Vegas are running about $30,000 for a 1 bed, and $50,000 for a two bed. HOA fees are easily $100 to $250 per month, which will be deducted from the rent to get net rent. There is going to be little effective equity left to qualify that it just doesn't seem to be possible to pull out enought ot move up.

David Cooper Investor 702-499-7037
0 votes
, ,
Mon Sep 24, 2012
There are specific guidelines when you are vacating your own residence which you own to move into a new home & you are aiming to use rent from the vacating residence to qualify. With FHA financing, you will either need to relocate to a new area not within reasonable commuting distance OR you will need to prove you have 25% equity in the vacating residence. Since you own your current condo free & clear, after some minor research, the lender will be able to figure out you have the 25% equity and so you would have the chance to use the it's rental income to qualify for the new home. However you will also need a signed lease agreement covering the 1st year of the new FHA mortgage you are getting (so if it's a 1 year lease effective September 30th, and you are closing on the new home October 5th, it won't cover the 1st year, it'll be 5 days short) and evidence of depositing the security deposit and/or 1st months rent. Conforming financing (Fannie Mae/Freddie Mac) has similar requirements, except they require 30% equity instead of just the 25% like FHA requires and also reserve requirements (aka cash in the bank after you close).

In order to use the equity from your current condo as the down payment on the new home, you will need to get the equity out by doing a cash-out refinance on your condo. Since you won't be planning on living in the condo for the first year of the mortgage, the refinance will need to be done as a non-owner occupied occupancy type. It's a little tougher to qualify for non-owner occupied mortgages on a condominium, but it can still be done. If you purchased the condo with cash because it couldn't be financed by a mortgage lender (due to a high investor concentration in the condo complex, too many people past due on their HOA fees, etc.) then you may also find doing the cash-out refinance to get the equity out to be a bit of a challenge. Taking the cash out will still allow you to have 25% equity in the home (in order to use the rental income), because cash-out refinances on non-owner occupied properties will only go to 75% of the home's value anyway.

FHA mortgages don't require that the borrowers are married, so you and your boyfriend can get an FHA mortgage as long as everything qualifies. I am actually doing an FHA purchase loan right now for a boyfriend & girlfriend, with one of their parents co-signing and providing gift funds for the down payment. FHA is pretty flexible in that aspect.

To really know your options though you will want to get more than just "message board" advice. In my opinion you'll want to talk to a patient loan officer who will walk you through the entire process and covers all of the bases.

Shane Milne | Lending in all 50 states | NMLS #81195
0 votes
madstarmodel - you are welcome. If you need any assistance I'd be happy to help you figure things out.
Flag Mon Sep 24, 2012
Thank you
Flag Mon Sep 24, 2012
David Cooper, Agent, Los Angeles, CA
Sun Sep 23, 2012
What is your combined income to qualify for $300,000 house. Rent from a condo will be reduced by HOA, Maintenance ,taxes. The net rent will NOT be a whole lot of money as a positive.


David Cooper Investor 702-499-7037
0 votes
Kurt Grosse, Agent, Las Vegas, NV
Sun Sep 23, 2012
Hello Madstamodel, As those below have said, it shouldn't be an issue getting you qualified. Once you are qualfied, the challenge comes in finding the home you like, in the area you want, in good condition. I am the Realtor you want. I have been selling real estate in Las Vegas for over 15 years but before that I was an engineer telling builders how to build their homes. Homes were built very quickly not too long ago. What would benefit you is to have someone educated to look out for your interest when viewing properties. Let's talk and get you set up on an automatic home search. If you choose to buy a short sale property, this can take awhile. I'm looking forward to hearing from you,
Kurt
702.656.1818
http://www.nvhousingsolutions.com
0 votes
Rhonda Brink…, Agent, Las Vegas, NV
Sun Sep 23, 2012
I would love to talk to you about this privately . I have a very good lender you could work with too. The answers are yes but we need to talk more to tell you all about your options. Please email me at Rhondasellsvegas@gmail.com or call me 702-239-6900. I am a native of Vegas and have been in the business over 16 years.
0 votes
Paul May, , Las Vegas, NV
Sun Sep 23, 2012
Answers-
Yes, Yes and Yes!
Yes, You can show that you are renting the condo out- since you paid cash for it- it is not a debt against your debt to income ratio- In fact, it is income that helps you-
You can apply for an FHA Loan,
The only issue is- can you pull out some equity from the condo to put down on the house?
Do you have 3.5% down without pulling out the equity on a $300k purchase?
Otherwise, that is the only thing we have to work on- getting the equity for the down.
Contact me and we can show you the new homes that fit your needs.
And I can set you up with the lender for the loan as well-
Sincerely,
Paul May -702-491-9601 - paulmay@mayteamlv.com
http://www.mayteamlv.com
Web Reference:  http://www.mayteamlv.com
0 votes
Ian Palast, Agent, Las Vegas, NV
Sun Sep 23, 2012
If you paid cash and have no mortgage, than your equity is the full value of the condo. Many condos in Las Vegas are not currently able to be mortgaged, so we would need to check your address to see if it is possible to get a loan against the property. If not, you would have to sell the condo in order to get at the equity.

If you can muster a down payment without leveraging the condo, then yes, lenders will consider the rental income from the condo, but only at 75% (or less) of the total annual amount. This assumes that the condo community has no rental restrictions (some do).

You may indeed be able to qualify for an FHA loan, but that issue is best answered by a loan officer. I would be happy to refer you to several excellent loan officers to choose from.

Please call or email me for a no obligation consultation, so that together we may review your situation and provide you with specific answers to your questions.

Ian Palast, ABR, SRS, SFR, CDPE
Keller Williams Realty - Las Vegas Summerlin
(702) 307-5500 Office
(702) 370-0327 Cell
ianpalast@gmail.com
http://www.BuyandInvestinLasVegasHomes.com
0 votes
Tina Lam, Agent, San Jose, CA
Sun Sep 23, 2012
Did the price of your condo collapse by 90-95% since March? If you paid cash for the condo, then 100% of the current market value is equity. $15K in equity seems very low on a condo in your area.

There are some non-conventional lenders who will consider the equity as downpayment. If you rent out the condo, then you can use the rent as towards your mortgage qualification after 6-12 months. Once approved for a loan, you're perfectly free to use your rent collected in any way you choose, including paying for your new mortgage.
Web Reference:  http://www.archershomes.com
0 votes
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