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I was wondering how this would work and how the lending standards could change.
I wanted to buy a property and live in it for two years. Then, move on to another property to live in. Renting the first one.
How will with the underwriter look at your first property that isn't yet producing income? Will the standard be that you have to have enough income to support both properties?
I understand for this idea to float you should be able to or have the savings to let the first unit go unoccupied for a while.
With the credit crisis, we inherited a problem where homebuyers actually planned out their abandonment of a property. They did this by buying a new property to move into and then leasing their existing home, only to discontinue to make their mortgage payment on the prior residence. A large percentage of these deadbeat landlords would pocket the rent and not bother to make the mortgage payment, leaving their tenants homeless when the eviction notice came.
Fannie, Freddie and FHA caught wind of this very early on and had to come up w/ a plan to minimize the possibility of this continuing. So, for the most part, a borrower must have the income to support the current mortgage, as well as, the mortgage for the home they are buying without any credit for rental income. However, if it can be proven they have 25% or more equity in the rental property (documented by an appraisal), the borrower may use 75% of the rental to offset the mortgage payment.
Most lenders are now going to want to see 6 months reserves on the rental property in addition to 2 months on the new home. Reserves are liquid assets shown on paper, but not spent, and the borrower must have access to these funds in the event of an emergency. Credit scores in the nosebleed section will be required.
Last edited by SmartMoney; 10-31-2008 at 08:13 AM..
Reason: wasn't finished w/ my post! dang computer.......
Unless, I find a bucket of cash my plan seems lofty.
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