You are wise to consider the financial aspects first before you embark on your journey to find and buy a new home. There are several things to be aware of.
First, lenders typically qualify you on the basis of two ratios. The so-called primary ration is established by taking your total monthly expense for the new home (mortgage principal and interest, as well as property taxes, homeowner's insurance or condo fees as the case might be, and mortgage insurance if it applies) and dividing it by your combined gross monthly pretax income. That percentage is your primary ratio. Many conventional lenders qualify buyers on primary ratios ranging between 28% and 38% depending on how much you put down, your credit scores, etc. For instance, if your lender qualifies you on a primary ratio of 33%, then in order to qualify for the mortgage, the entire monthly payment may not exceed 33% of your gross monthly income before taxes.
The second ratio used by lenders encompasses ALL of your fixed monthly obligations, and include the house expenses mentioned above as well as any long term obligations, i.e. car loans, student loans, alimony payments -- anything that will take more than six months to repay. This ratio, known as the secondary or back ratio is typically in the 38% to 45% range, and included in this ratio would be your monthly expenses for your old home.
So yes, in answer to your question, if you keep your old home, it may have a limiting effect on how much you can finance when you buy the new home.
You may however be able to partially offset the limiting impact of your old home, by renting it out. Typically, lenders are willing to take 75% of the actual rent you are receiving on the home, and add that to your monthly income, thus lowering the secondary ratio somewhat and allowing you to qualify for a higher loan for the new home.
In general, if you put down more than 20% on the new home, you will have less restrictive lending guidelines to deal with and will have an easier time financing the new home. Put down 25% and it becomes even easier.
Please keep in mind, that this information is general in nature, and not meant to be specific. Lending guidelines have been changing so rapidly over the last two years, that even experienced lenders are constantly updating their information to keep up with changing underwriting guidelines.
I have been using two lenders a lot, and they have both been excellent at providing accurate information. You can try either one, although there are many other knowledgeable loan officers in the area as well.
I have been using
Senior Loan Officer
Greenpark Mortgage Corporation
140 Gould Street
Needham, MA 02494
617.797.7995 - direct
781.726.6757 - fax
NMLS license ID: 38902
Fairway Independent Mortgage
18 Crawford Street
Needham, MA 02494
MLO License # 15695
You may also find the following link helpful, which will allow you to calculate mortgage payments on a variety of lender's programs. You can adjust the calculation parameters to fit a specific house. Just by way of a disclaimer, there are other reliable and good programs out there as well.
I hope this helps! Good luck on the house hunt!