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Can I rent my current home out and purchase another home with a rental agreement?

Can I rent my current home out and use the rental contract to boost my purchase power for my new home? and would I be able to put 5% down (95% ltv)? by hbset_757_393 from Brea, California. Aug 10th 2016 Reply


Deborah Garvin (loanmonarch)
#495 ranked lender in California - 53 contributions

The best answer is "Maybe". There are several factors that would determine the amount, if any, of the rental income a lender will allow. And, it could/would vary from lender to lender and product to product.First, there are some universal guides that you should be aware of:Yes, you could purchase with 5% down. Or 3.5% if you went FHA and 0% if you went VA. There is no restriction on the product for buying a new home.If a lender would use the rental income, it would be reduced to 75% of the actual rent received (25% vacancy factor), and offset by the current PITI (principle, interest, taxes, insurance and HOA fees, if applicable). For example, if you rented you home for $1,000 and your current PITI is $1,000 you would (on paper) have a debt of $250 (negative rent).Do you have experience as a land lord? A lender will want to know.Generally, six months reserves are required for the rental property.In most cases, a lender will require you to be able to qualify with both mortgages (PITI) as debt. But, in some cases, this may not be the case. Experience as a landlord, extensive equity in rental property, etc, MAY allow exceptions.As you can see, there are numerous variables that would need to be addressed to determine if keeping and renting your current home is the most effective way for you to purchase a new home. All my best,Deborah

Aug 10th 2016
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Nikitas Kouimanis (MrMortgage)
#7 ranked lender in New York - 113 contributions

It would have to make sense new home would have to be a true primary residence. If your upgrading no problem if you're downgrading you could run into an issue and if your buying a multi family and expect to call that your primary residence that definitely won't fly. Not to say you are just throwing it out there.

Aug 10th 2016
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Larry Gray (lgray_312_247)
#595 ranked lender in California - 1,139 contributions

It is very possible, as long as you meet other requirements of the loan. I have done home purchase loans for buyers who needed rental income from their existing primary home to qualify for the new home. Be sure that you do not break any agreements with the lender on your current property (i.e. recently refinanced on the property as your primary home.)You can contact me via this profile if you have any further questions or would like to be qualified for the home purchase loan.

Aug 10th 2016
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William J Acres (William_Acres)
#1 ranked lender in Arizona - 8,486 contributions

More info needed, but in general, there are lending guidelines which allow for you to use potential rental income from an exiting property for qualify purposes.. Not every lender will allow this, but the majority will.. and yes.. if you are going to be an "Owner/Occupant" then 5% down is available assuming you are looking within the conforming loan limits for your area. However, without looking at your complete scenario, it's impossible to say for sure.. for this reason, I suggest you contact a LOCAL mortgage broker and apply with them. Once they see your complete loan profile, they will be better equipped to advise you properly. Also, by applying with your LOCAL Broker, you have an advantage because he's familiar with local customs and works with many lenders with each one offering a different type of lending program. This is unlike the local bank which typically only has a few lending programs. The more lenders, the more lending options, and the more likely your scenario will be accepted.. Plus, the broker is experienced in seeking out the best loan terms for your particular scenario, and he has lower overhead which typically results in lower rates and fees than most of the larger lenders.. I'm a Broker here in Scottsdale AZ and I only lend in Arizona. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. William J. Acres, Lender411's number ONE lender in Arizona. 480-287-5714 WilliamAcres.com NMLS# 226347

Aug 10th 2016
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