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We have excellent credit and have been pre-approved for a mortgage. Having a difficult time selling our current home, so thought about renting through a property mgmt. company.
Have been told by Mtg company that in order to get a mortgage, we either need 25% equity in our home, or the house must have been leased for at least one year. I don't know if that is just this particular lender's rules, or if it across the board with all Mtg companies. Is anyone familiar with this?
Since housing values have pretty much lost ground, I can def say it will not appraise at what it did when we had it built in '04. Very depressing!
Yes, this rule has been in place for about a year now. In order to count any rental income to offset a mortgage on your current primary residence, you need 25% equity (an appraisal on the to-be rental is customary) or a proven track record, evidenced by a lease and tax returns. This regulation is commonly referred to the "Buy and Bail" rule applied to Fannie, Freddie and FHA loans.
Now if you can qualify carrying both mortgages, counting rent is moot. If the mortgage on your current residence is a conventional loan, you could pursue an FHA loan and find a family member to co-sign for you (actually it's a non occupant borrower). If your current home is already an FHA loan, it's going to be tough going.
Thank you SmartMoney. I definetely wish we could carry two mortgages (well, not really), and we have an FHA. Guess we have to wait it out until someone buys.
there is an exception to the equity rule for 'relocation', but your new house has to be 'not within commuting distance' from your previous house. from google:
Quote:
This actually became effective in September 2008. When converting a primary residence to a rental home, the rental income can only be used for qualifying if: (1) the borrower is relocating OR (2) the new rental meets at least 25% equity.
so if you are 'relocating', you don't need the equity.
Karenn,
That would be nice if we fall under that. My husband applied for a job in another state, where he was hired and is living now while the kids and myself wait for our house here to sell. I don't know if that qualifies as relocating (different company altogether), but I shot the lender an email asking about it. Doesn't hurt to try! Thank you!
We have excellent credit and have been pre-approved for a mortgage. Having a difficult time selling our current home, so thought about renting through a property mgmt. company.
Have been told by Mtg company that in order to get a mortgage, we either need 25% equity in our home, or the house must have been leased for at least one year. I don't know if that is just this particular lender's rules, or if it across the board with all Mtg companies. Is anyone familiar with this?
Since housing values have pretty much lost ground, I can def say it will not appraise at what it did when we had it built in '04. Very depressing!
Hi Mompooh3,
This is definitely a lender specific overlay where the lender adds the Fannie/Fannie buy and bail guidelines across all of their loan programs.
Since your husband relocated for work (it doesn't have to be with same company) you should be eligible to count the rental income as long as you're working with the right lender.
A little turn in events: I emailed our lender and just basically repeated what you all had responded. In the lender's words "it got my wheels spinning and I did some research". Come to find out because we have an FHA (don't know why that made a difference), we are able to lease, without waiting a year. The tenants just need to be "locked in" for a year. Thanks so much everyone :-)
Anyone know how this applies to second/vacation homes? I have a second home out of state but would like to get a new primary residence (in state) before renting/leasing out the second home. Living with parents, so have no primary home mortgage yet, unless the second home counts.
I could lease it first if I had to but would prefer not to. Does one need the 25% equity otherwise as well? I don't have 25% equity yet.
Would you not qualify for a both the new mortgage, and your existing mortgage, without rental income?
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