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Old 03-21-2011, 02:17 PM
 
28 posts, read 95,669 times
Reputation: 43

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Not sure if my title makes sense, but here's the deal. We are currently about halfway through our 30 year mortgage on our home. We have been looking for a home to buy but haven't found the right one yet. We are planning on renting our current home when we do find something, at least for awhile. Here is the question: there are some good-quality brick duplexes for sale nearby. From the listings, they have been updated and have long-term leases. Depending on how much money we put down, the mortgage payment on the duplex would be anywhere from break-even with rent completely paying mortgage, to us pocketing half of the rent. I am wondering how a rental property affects getting a new mortgage (for a house that we want to purchase and live in?) Is it a positive? A negative? Mix?
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Old 03-22-2011, 06:12 AM
 
Location: MID ATLANTIC
7,120 posts, read 16,109,668 times
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Okay, I think I have it right......by "second home," you mean move up home. ("Second home" also has a definition of being a home you have at the beach or mountains that you don't lease out). So, what you want to do (if I got it right) is turn your current residence into a rental and buy another home.

Here's the deal.......if you have equity in the home you plan to lease, the mortgage you are paying can be offset by rent. (With 15 years, you should be okay, but way too many people used their homes to leverage other expenses). There's a forumula we use, depending upon the type of loan on the new property. If you don't have the required equity, the entire mortgage payment of your current home must be included in your debt ratio.

Now, what I can't tell - when you say "duplex,"- do you mean a 2 unit property? (one unit is owner occupied and one is a rental). If that is the case, then this is one of the rare cases where history nor equity is needed to use rent to offset the payment. An income analysis and rent comp schedule are ordered along with the apprasial. The lender will use the income in the appraisa, or, any current lease in effect at the time of purchase.
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Old 03-22-2011, 08:54 AM
 
28 posts, read 95,669 times
Reputation: 43
Yeah, I thought I kind of mucked up my question.

I don't think my current home and our decision to rent it out will be an issue. We have a good amount of equity built up in it and have never borrowed against it. We've been pre-qualified to keep our current home and still get another mortgage in a price range we want, so we're ok with that.

The duplex would not be for us to live in, it would strictly be an investment property.

You did answer my question though, I think. The question is, if we bought the duplex and had a mortgage payment on it but had rent coming in from both sides of it, how does that affect us getting a mortgage for our new primary residence. I think what your are saying is they look at rental history/lease length vs. mortgage amount? So as long as the duplex rent income covers the mortgage this should not negatively affect us getting a new mortgage for a primary residence?
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Old 03-22-2011, 11:48 AM
 
Location: Boise, ID
7,788 posts, read 20,551,955 times
Reputation: 8717
SM, I thought there was a rule that investment property income could only be counted if you had been collecting rent (on any property) for a certain time frame.

So if that were true, and the OP bought a fresh duplex, had a mortgage, and put tenants in, they would have to be able to qualify for any and all mortgages without counting the rent income. Is that not true?
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Old 03-29-2011, 08:49 PM
 
53 posts, read 153,934 times
Reputation: 32
Quote:
Originally Posted by Lacerta View Post
SM, I thought there was a rule that investment property income could only be counted if you had been collecting rent (on any property) for a certain time frame.

So if that were true, and the OP bought a fresh duplex, had a mortgage, and put tenants in, they would have to be able to qualify for any and all mortgages without counting the rent income. Is that not true?
I was told that I needed 18 months of my rental income on my taxes (not just a lease agreement as we used "pre-mortgage meltdown") - OR 20% equity in rental house OR earn enough money to cover both mortgages in the ratio. This was told to us in August of 2010. We had NEVER had an issue getting a mortgage prior and our broker told us that basically 2 years ago our FICO would have gotten us one alone...now ?
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Old 03-31-2011, 11:13 AM
 
35 posts, read 156,097 times
Reputation: 82
Hmm....my husband and I just got married and we each owned a townhouse. He rented his out and moved in with me. We found "our house" and just bought it while still owning our separate places. We already closed on "our" house and so essentially have 3 mortgages currently (with one rented out). We're going to be selling "my" house and move into "our" house this summer. His place was rented out a month after he moved in with me, he didn't have a 18 month history and the lender accepted the lease agreement. Now, the lender will only count a percentage of the rent you collect so keep that in mind. We didn't have any problems at all and although we can afford the 2 payments for a while ("my" house and "our" house) it's not the most ideal situation but we're in a good sellers market and hopefully "my" place will sell fairly quickly. As long as your debt-to-income ratio can support everything you should be fine. FHA allows a slightly higher debt-to-income-ration than a conventional loan. Hope this helps?
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