We were just notified by Tammi Lewis from George Mason Mortgage that one of the Fannie Mae guidelines has been lifted. This particular guideline has been a problem for a lot of people because of lost equity position in their primary residences. If you wanted to rent out your house and have the rent count as income to offset that mortgage payment, in the past you had to have 6 months of reserves (money) to cover BOTH of those mortgages and your current house had to have at least 30% of equity in it.
Now that requirement is gone so if you don't want to sell your current house or don't have enough equity to sell it, you can rent it and count the rental income:
Fannie Mae instituted a guideline during the height of the financial crisis in relation to the conversion of a buyer's current home to an investment property when they were buying another home. They required that the buyer have 6 months of reserves for each property and would only allow the existing mortgage to be offset with a lease if the buyer had a 30% equity position in the property they currently owned. This guideline was intended to be temporary in nature and it's purpose was to ensure that borrowers have adequate capacity and financial reserves to successfully manage multiple properties.
Fannie Mae has now removed that guideline in it's entirety which serves as a great opportunity to qualify more buyers for mortgages. Simply put, a buyer can now use a lease to offset their current mortgage payment without having to show any equity in their existing property. This is HUGE. Most buyers could not carry both mortgage payments when trying to buy a new house in the past so this opens up the door for all those buyers that wanted to move but couldn't because their equity position was too low in their current home. And it removes the reserve requirements for two residences so now buyers do not have to show 6 months of reserves for each property.
This can be especially helpful if you want to keep a home in another area (retirement home?), but take advantage of the tax benefits of purchasing a home in the area where you will live for awhile. In most parts of Maryland, especially around the Fort Meade area, it's cheaper to buy than to rent so we find that if people are planning on living here for 3+ years, typically they will choose to buy for the cheaper payment and tax benefits. Plus the rental market is great so if you buy here and move somewhere else but are planning on coming back, you can rent it out while you're gone.
If you'd like a local mortgage lender recommendation to see if you qualify for a mortgage based on your individual situation, let us know!
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