No Equity is no longer a problem if you need to want to Rent your present home and move or relocate to another in Woodbridge, Virginia or anywhere else for that matter!
Finally, some sensibility has come back into he marketplace!
Yes, you do will need to qualify for both homes but you also will be able to count the rental income when qualifying. For as long as I can remember if you decided to rent your home and buy another it was no big deal as long as you could qualify with the sensible underwriting rule of a 25% vacancy factor reduction.But in 2008 that all changed with a change in the conversion of your primary residence rule with Fannie Mae.
Back in 2008 Fannie Mae changed the lending guideline to stop people from converting their home to a rental and buying another home. The thinking was they would prevent homeowners from walking away from their present underwater home and stop paying once they completed the new purchase. It was the height of the financial crisis and they were trying to prevent folks walking away from underwater homes by buying another and providing a fake lease to qualify and then just walking away which many did. Fannie Mae initiated a guideline requiring a minimum of 30% equity in the home to count the rental income which basically strangled the move up market because you needed enough income to qualify for both homes! So basically they harmed everyone for what a few were doing!
This rule while effective basically strangled many upstanding homeowners who were stuck in their home. So for the past seven years if you had job transfers, or you wanted to retire to a new location, downsize or buy a larger home due to life circumstances such as divorce ,illness or even aging parents moving you had to short sell or let their homes go to foreclosure if you did not have enough income to qualify for two homes! It has been a long seven year's, but we finally have some relief from this rule!
Now as June 30th, 2017 the FannieMae guideline was quietly changed back to the way Residential Property was always addressed! This is really good news!
This means if you own a home and for whatever reason want to move you are now able to do so, you do not need 30% equity to turn it into a rental property!
In Woodbridge, Virginia our rental prices are about 35% higher than mortgage payments so most folks can lease their present home and cover their mortgage payment and then some! When a lender qualifies you for a loan they will take the amount of the expected annual lease amount and deduct a 25% for a worst case vacancy factor. The remaining 75% would count as income to help you qualify for the next home. So if your mortgage on your single family home in Woodbridge is $1800.00 and the going rent for a detached home in that community is $2600.00 then the lender is going to see you have a positive cash flow on your present home of $150.00 even after they deduct the vacancy factor.
What this means to you is you can move to your dream home, rent out your present home and now have a way of building wealth rather than short selling. So if you are underwater and maybe you circumstances have changed over the last 7 years this will help you.
Some luxury homes are still under water but are gaining in equity position over the past three years. In seven years, personal circumstances could have changed and many people are still waiting for their equity to come back. If you purchased in 2006-2009. Think about it this way there is someone out there looking for exactly what you have at the payment you are paying or maybe even a little more. That means you can move and find the home you have been dreaming of either across town or across the country the time is now while the rates are low!!
I am seeing so many military renters coming in looking for great homes that are clean and loved and can't find one. So if you looked into selling or renting from 2006 till now and were turned down due to not qualifying for two homes or not have 30% equity your ship has just come in!!!
Give me a call and let's talk about your situation and see how I can help you to pull it all together and formulate a plan of action for you!
It is never to early to start a dialog to prepare for buying. If your lease is coming up for renewal talk to me as soon as possible. You may be surprised to find out you are in a better situation than you thought.
As a Buyer Agent, I specialize in helping buyers find the home of their dreams. My goal is to coach you on your options based on your needs, wants and finances. To get started with a recommendation to a lender or to talk about your options Contact Me Now or call Patty at 703-801-9367.
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