HUD has issued Mortgagee letter 2008-25 with new underwriting guidelines for borrowers who wish to keep their current home while financing the new home FHA. Effective with all FHA case numbers assigned on or after September 22, 2008, rental income may not be used to offset the current mortgage payment. There are only two exceptions to this guideline:
1) Relocations: The borrower is relocating with a new employer or being transferred by his/her current employer to an area outside reasonable commuting distance. In this case Towne will require ALL of the following:
- A one year lease with a one month minimum security deposit verified by a cancelled check deposited into the borrower's account.
- A comparable rent schedule on the property being leased (ordered through AMCSS (888)752-5143 or Dart appraisals (248)333-3036)
- A minimum of 6 months reserves on the current home must be documented - must be liquid funds (no gifts, retirement accounts, stocks, etc)
2) Maximum 75% LTV on current property: LTV must be determined by either a current appraisal (no more than 6 months old) or by comparing the current unpaid balance to the original sales price of the home (from the original HUD I Settlement statement).
For more information go to http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/08-25ml.doc