Dear Second Homeowner,
After reading all the previous answers, you may still be a bit confused. (Especially when people write in from out-of-state, not knowing the laws in Texas.) First, let me say it depends on what you are trying to do; and second, it depends on the lender. Since I am not a mortgage broker, I can just tell you what I have seen over the past 32 years. And then you have to realize that ALL mortgage lenders have changed their rules for underwriting in the past year or two. But you will find that some lenders will make the type of loan you are looking for and some won't. When you contact me, I will put you in touch with one who will.
But they are going to ask about what you are trying to do first. Are you trying to buy the second house right away; move into it at your leisure; and then find a tenant for your first house? IF that is your plan, you will need to qualify for two loans at once. There is no restriction on owning two houses; one can be your homestead, and the other can be a vacation home. You would have to make enough money to carry both mortgage payments based on your income-to-debt ratio. Few people can do this, but if you have an exceptional income and no other debts, it might work. (It depends on the price of the house.)
It will be a lot easier to accomplish if you rent the first house to a tenant, and then go out and buy your second house which will become your homestead. In this type of a scenario, the lender may not hold the first mortgage payment against you as a total debt. They may be willing to give you some credit for the rent as "income" to offset the debt of the mortgage payment on the first house. So now the math kicks in, because it depends on the size of the first mortgage payment vs. the amount of rent you can get in today's market. (You need an experienced Realtor to evaluate that for you even before you call a mortgage company.) Some lenders will give you a credit for about 70% of the rent money.
So now it becomes a question of convenience. (Nobody said becoming a Landlord would be easy!) You are probably thinking that you don't want to move out of your first house BEFORE you can buy the second one. Well, you may have to move twice to make this scenario work. You could rent an apartment for a month, for example. (You don't have to sign a one-year lease.) But many times in the past, I have assisted someone who wanted to do exactly what you are trying to do without them renting an apartement. You would have to present the lender with an executed lease agreement between you and your new tenant. In the good old days, we used to give the lender a "signed copy" of a lease. But in today's world, they will verify that you have a live tenant on the other end of the transaction. So before you can close on the second loan, you will have to present them with a tenant for your first house. This is not impossible, and I can show you how to do it.
Obviously, Timing is the key factor involved here. We can have a house standing by for you to purchase it, while we advertise for a tenant to take over your first house. The new tenant will have to be understanding and patient while we get your new loan approved. The key here is to have your second loan PRE-approved. That way it won't take us long to actually close on a house. --It would be ideal if you could rent your house to a relative or close friend, as they might be more understanding of the situation.
Ok. --Long answer. --But you asked a question about a complicated situation. When you get in touch with me, we will sit down and go over the numbers in detail, and I can show you exactly what the lender is going to look at -- even before you call a loan officer. You are very wise to start this project. Eventually, you will become a seasoned Landlord, and you can build up a repertoire of properties which will give you a solid retirement income. Soon, you will become a millionaire on paper!
Good luck to you!
ULTRA Real Estate Services