Remember the good ole days when a buyer could EASILY turn their current residence into a rental and buy a new home? Well, those days are over. Our lives and our buyers lives just got a little tougher.
There are new guideline changes that became effective Aug 1st that we should all be aware of. The guidelines are listed below, but in a nutshell, here's what it says:
We can still use rental income to "offset" the current mortgage payment, but now Fannie (with Freddie soon to follow) is requiring that the only way to use that rental income is if the property has a minimum of 30% equity. Also, the rental income now has to be documented with evidence of a security deposit and a receipt of that security deposit into the borrower's bank.
No more just getting a 1 year lease!
If we don't have 30% equity, the buyer/borrower has to qualify with BOTH mortgage payments....the current and the new. In addition, the borrower must have 6 months of PITI for BOTH properties in reserves.
Couple of options to consider:
- Freddie Mac has not implemented these new guidelines, but is expected to follow soon. This is kind of a "dangerous" option to fall back on, as Freddie could implement the changes tomorrow, 2 weeks, 2 months....we just don't know.
- If the loan on the current home is not an FHA loan, we could possibly look at doing the new home as FHA.
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