PART 1 – MORTGAGE FINANCING

The current real estate climate has prohibited potential sellers, who bought or leveraged their current home at the height of the market, from being able to sell their current home today and recover what they paid for it. This has resulted in sellers, who need or want to sell, to consider renting out their current home and purchasing their next home, in their mind, “until the market recovers.”

I’ve had several conversations with potential sellers in just the last three weeks about the possibility of doing exactly this, which has raised several serious questions concerning homeowner and tenant insurance policies, mortgage requirements, whether or not to use a property management company, and municipal compliance with turning your home into a legal rental property.

I find that most potential sellers just don’t have the information they need to make an informed decision on whether or not to rent their home while they pursue the purchase of another.

After speaking with Michael Marinaccio, a 20+ year experienced and knowledgeable home mortgage consultant with Thoroughbred Mortgage, I found out that current mortgage guidelines (conventional loans) require a potential seller to have at least 30% equity in the home they want to sell, in order to use the rental income to qualify for a new mortgage on the home they want to purchase. If they do not have 30% equity in the home, the bank will not consider the rental income and the owner would have to qualify for the new mortgage with the current full monthly debt of the home they want to rent.  A seller would have to know whether they could even qualify for the new loan with the additional debt of their current home.  FHA loans have a separate set of guidelines.

Implications on being able to qualify for a mortgage are just one consideration. Over the next few blogs, I will attempt to help evaluate the feasibility of this particular real estate goal by offering information that impacts the ability to move forward or not.

Michael Marinaccio HMC, is a Mortgage Consultant with Thoroughbred Mortgage and he can be reached at 845-742-4638; or click here to visit his website.
 
Kim Simms is a New York State Licensed Salesperson and Residential Real Estate Consultant with Houlihan Lawrence Real Estate Brokerage in East Fishkill, NY. She can be reached at

Posted by:  Kim Simms