I’m playing with the idea of renting my existing home and buying a buying a new home instead of selling my existing home. I’m wondering if mortgage companies don’t like this…or how this will effect how much the mortgage company will approve you for, etc. Thank you in advance for any help you can offer.
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It really depends on your credit, income, type of loan, and down payment. Talk to a mortgage company to find out if its possible.
A mortgage company typically wants to see your mortgage (or, mortgages) being no more than 1/3 of your income. If paying two mortgages will put you very far over this, then a mortgage company will see giving you a mortgage on a new house as very risky.
One thing that might help is to go ahead and get a 1 year lease from a tenant – a new mortgage company might see you as a better risk if you can show a lease. If you clearly make enough money to cover both mortgages without a renter, then you should be fine.
Second, keep in mind that you are not just paying two mortgages – you are now paying two property taxes, two home-owners insurance policies, etc. Make sure you can get enough in rent to cover all of that.
The main issue people have when trying to do this is qualifying under the new buy and bail guidelines.
Back in the day you could provide a lease agreement and lenders would give you credit for the rental income to off set the mortgage payment.
Now lenders will only do this if you
1) Have 20-25% equity in the home you’re going to rent out.
2) A history of receiving rental income that you can document with tax returns.
3) You are relocating for work outside of a reasonable commuting area
You can find more information here:
http://www.fhamortgagesdoneright.com/are-you-thinking-about-moving-up-and-renting-your-current-home-here-is-what-you-need-to-know/