This Week's Caller Asked: "Peggy, We Would Like To Buy A Larger Home, Can We Keep Our Current Home as a Rental?
I get this question a lot. With interest rates being historically low, so many folks have started dreaming out buying a larger home. The very first step is to contact a local lender about your options. Markita Aldridge Woods of Westar Mortgage here in Lake Ridge, Virginia has written a very timely post on this exact subject.
This is some very good information.
If you have questions about selling your home, or what it takes to get it ready to sell please don't hesitate to contact me
Via Markita Aldridge-Woods: "Your Woodbridge FHA/VA Lender" (WestStar Mortgage):
I currently have a client that is purchasing a home but has another home to sell. So I thought this would be useful information to share from Mortgage Talking Points:
What do you do when a client wants to purchase a home - but has not sold their other one? If they are applying for a conventional loan, Fannie Mae requires that they either have 30 percent equity in their current residence OR 6 months cash reserves for both homes.
3 Home Buying Scenarios:
Current Home is SOLD but not CLOSED prior to purchasing other one.
Must qualify for BOTH house payments and have 6 months worth of payment reserves for BOTH homes.UNLESS there is an executed purchase contract and all finance contingencies have been cleared on the home they are selling; OR have 30 percent equity in current residence (Appraisal/BPO) PLUS 2 months worth of payment reserves for both homes.
Existing Home Converts to Second-Home Status:
Must qualify for BOTH house payments, AND Have 6 months worth of payment for BOTH homes; OR have 30 percent equity in home being converted to 2nd home (Appraisal /BPO) PLUS 2 months worth of payment reserves on BOTH homes.
Existing Home converts to Rental Property:
Must qualify for both house payments AND have 6 months cash reserves for BOTH homes. UNLESS Rental income can be used to offset monthly payment ONLY if home being converted to rental has 30% equity (Appraisal /BPO) AND home is leased AND security deposit has been verified.
The bottom line:If your client is buying a home without selling their current home, there will always need to be cash reserves after closing in the amount of 6 months PITI unless there is 30 percent equity in their current home. Then they need 2 months reserves!
If you need tailored mortgage solutions contact Markita Aldridge- Woods at (703) 497-3936 or via email.
We offer FHA, VA, VHDA, USDA and Conventional financing in Woodbridge, Lake Ridge, Northern Virginia, Stafford and surrounding areas.
(WestStar Mortgage Inc. is licensed by the Virginia State Corporation Commission and License No. MC-1875)
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