Buy and Bail
It wasn’t long ago a family could improve their lifestyle buy purchasing a newer larger home and using their current residence as a rental to help create overall wealth.
Guidelines were simple, provide us with a lease on your current residence and we will use 75% of that rent to go against the PITI of your current home.
Please be aware of the new guidelines if your client currently owns a home and want to retain it as an investment.
37.16.2: Sale or Conversion of Primary Residence (01/02/09)
Borrower converting Primary Residence to Investment Property
If the Borrower is converting their Primary Residence to an Investment Property and purchasing a new Primary Residence, the following requirements must be met:
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The LTV/TLTV/HTLTV ratio of the property being converted must be less than or equal to 70% as evidenced by at least a 2055 exterior-only inspection, dated no more than 60 days prior to the Note Date, to use rental income to qualify as described in Section 37.14. The rental income may be considered in an amount up to 30% of the total gross income that is used to qualify the Borrower for the Mortgage. In addition, the rental income must be documented with a copy of the fully executed lease and the receipt of a security deposit from the tenant with evidence of the deposit into the Borrower's designated account. |
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If the LTV/TLTV/HTLTV ratio is greater than 70% for the Primary Residence being converted to an Investment Property, Seller cannot use rental income to qualify the Borrower, the Borrower's previous housing payment and the payments on the subject Mortgage must both be included the monthly debt payment-to-income ratio, and the Borrower must have reserves equal to SIX Months PITI for both Mortgages. |
To your continued Success
Daniel Pettigrew
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