Purchase New Home, Rent Old Home (interest rate, approve, garnished, credit)
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I purchased a home in Florida in 2005 when I was single. It is not in the best of neighborhoods (crime). I married earlier this year and my wife and I have found new construction in which the builder/lender has indicated that they would lend us enough to build a house even with the property I currently owe being counted on our debt to income. I want to keep our first house as a rental income property. It would have to rent 10/12 months per year for it to work out.
My question is, if worst case scenario played out and it sat un-rented for 9 months and our savings was depleted and couldn't afford both mortgages without any rental income, what could happen? If I had to short sale or forclose, would this affect my wife's credit eventhough I purchased the property before her and her name was never added to the deed? What about a savings account she has had her entire life (~$30k) that is still in her name only???
I don't plan on short sale or forclosure, but for the sake of my family, I have to plan on a worst case scenario and make an educated decision from there.
If there is any other pertinent info I left out, let me know and I will provide it.
I'm pretty sure in Florida, she would not have any liability if the current residence went to foreclosure. You could be sued, face a lien, have your paycheck garnished or face a civil judgment. No one could touch your wife's money. Make sure you keep assets separate. There's nothing like getting a 1099 for 150K and now you get to deal with your worse nightmare, the IRS.
I am not a lawyer and you should seek advice from someone qualified to give you counsel.
Don't be stupid. If your rental doesn't rent for 9 months and it causes you to use savings then you can't afford that new house. So what if they approve you. I don't care what alot of people say. Banks are still throwing money around on bad investments.
Get something cheaper, stay there, rent something else or tell your wife to help out and use some of her money to get that first house sold.
You ended your post badly and it sounds like you're ready to just do the easy part just so you can have that nice house
We are in a similar position as the OP. My now husband bought a place when the market was near peak and now we are underwater. If we want to sell, we need to bring $100K to the table. Interest rates are at an all-time low and some new construction builders have amazing deals out there right now. In our case, it is cheaper to build a brand new home than it is to purchase a resale.
We have opted to build the new home and keep the current residence and rent it out. Before we made our decision, we made sure that we could afford the mortgages on both places if the rental sits vacant (we can). We also monitored the rental market for about a month in our area to see how much places are going for and how long they are sitting on the market before making our final decision.
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