How do you rent out a home you live in and buy another at the same time?

Asked by Darcy Dittenber, Colorado Springs, CO Tue Oct 2, 2012

I just refinanced my town-home but have a mother who is in poor health. Need to find a place we can live together. Is there a way to finance a new house and rent out the existing home? The renter would be to pay the mortgage on the town-home since the value of the place has dropped and it will be difficult to sell it without owing on it.

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Kevin Kudrna, Agent, Denver, CO
Wed Oct 3, 2012
You can purchase another home but there are several factors that need to be considered. The best scenario I have seen is being able to rent out your townhome with proof of rental income and rental agreement. The rental income will be considered into your total income and will be factored in when the lender looks at your total debt including the townhome loan. Typically a lender will consider approximately 75% of the rental income towards your total income.

The best thing to do is get in touch with a professional loan officer to assist with this assessment in figuring out your ability to purchase.

Best of luck.
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Sally Grenier, Agent, Boulder, CO
Wed Oct 3, 2012
A lender would be able to give you a definite answer, but to my knowledge, yes, it can be done, but you have to qualify for the two mortgages. I don't believe they allow you to count the rental income as income (unless you have a bunch of equity in the property, which you don't). Is there a way you and your mother could qualify together (she would need to also have good credit and a source of income).
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