Buying New Primary Home and Renting Exiting Home
In this blog, we will cover buying new primary home and renting exiting home. The real estate market is hot again despite rising mortgage rates. Home Prices nationwide have been increasing for the past several years.
On Tuesday, the Federal Housing Finance Agency announced that it is raising the conforming loan limits for Fannie Mae and Freddie Mac to more than $715,000. In most of the U.S., the 2023 maximum conforming loan limit will be raised to $715,000, up from 2020’s level of 510,400.
Can I Keep My House as a Rental Property and Buying New Primary Home?
The stock market is extremely volatile. Inflation is soaring to record levels. The FEDS keeps increasing interest rates. Keeping money in cash or in the bank is not a sound investment because of inflation and the value of the dollar plunging. Why not keep the old house as a rental and not sell it if you were intending on buying another primary home. One of the frequently asked questions at Mortgage Lenders For Bad Credit, Inc. is can I put my house on rent and buy another.
Can you rent out your house and get another mortgage to buy a new house? Yes, renting out your current house and getting anothermortgage to buy a new home is possible. However, you’ll need to meet the financial requirements of a mortgage lender to be approved for the new loan.
Can I Use Rental Income From My Old House Buying New Primary Home?
When buying another primary residence, VA loans allow the buyer to count up to 100% of the new rental income on the departing residence. In order to count the rental income, a 12-month lease must be provided, and most lenders even require proof of the first month’s rent or security deposit.
The FHFA is in charge of conforming loan limits. HUD, the parent of the Federal Housing Administration (FHA) is in charge of FHA Loan Limits. FHFA has increased Conventional Loan Limits to $647,200 for 2022, News from the Federal Housing Finance Agency is conforming loan limits will again increase the conforming loan limits for 2023 to $715.000 due to skyrocketing home prices. HUD increased loan limits for 2022 have increased to $420.680. HUD has not yet announced it will be increasing loan limits for 2023.
Loan Limits Increasing Due To Rising Home Prices
Both government agencies increased loan limits due to rising housing prices. FHFA has increased loan limits for four years in a row. HUD has increased loan limits for four years in a row due to housing price increases and is expected FHFA increase for 2023. Many homeowners are upgrading to a larger home and/or downsizing to a smaller home. This is due to empty nesters deciding in buying a new primary home and renting exiting home. This is becoming more of a norm now due to escalating home values nationally. Investing in real estate has never been so popular for the first time since the Great Recession of 2008.
Buying New Primary Home and Keeping the First House As a Rental
However, there are issues when buying new primary home and renting exiting home.
Once you occupy the home as your personal residence, you will no longer be able to take any of the deductions you took when the property was a rental. This means you will get no depreciation deduction and you can’t deduct the cost of repairs. If you host your primary residence, you’ll need to register your listing with the relevant City of California. If your listing is eligible, you’ll receive a pending permit number immediately which you’ll need to add to your listing to comply with the ordinance. Registration costs $89 and must be renewed each year.
Owner-Occupant Versus Investment Home Loans
There are many instances in that homeowners are refinancing their current homes as owner-occupied homes. Then weeks after closing, they are seeking another home as an owner-occupied home. They are planning on keeping the original owner-occupied home as a rental after they close on their first home.
Down Payment Guidelines on Primary Versus Investment Homes?
Owner-occupant mortgage loans require the least down payment. Owner-occupant property loans also are considered the safest for lenders. So mortgage rates are the lowest. Investment homes require a 20% down payment. Investment properties also have higher mortgage rates than owner-occupant homes. Second home financing requires a 10% down payment.
Owner-occupant mortgage loans require a 3.5% down payment on FHA loans. No down payment on VA loans and USDA Loans. 3% to 5% down payment on conventional loans. Private mortgage insurance is required on conventional loans with less than a 20% down payment.
How Soon After Refinancing Can I Buy New Primary Home?
Purchasing a new owner-occupied home after refinancing the current home is fine. This holds true if the homeowner had a new job offer. Lenders want homeowners to live in their new owner-occupant home purchase for at least one year. If the intent is to mislead the bank or lender then it is illegal. If the intent is to mislead the bank or lender so they can get away with putting down a lower down payment and take advantage of the owner-occupied mortgage rates, that is considered mortgage fraud.
Buying New Primary Home As Owner Occupant Home
However, if you recently refinanced your home with the intent of living there for at least a year or more but had a change of heart because you saw a major deal on a much bigger home, then it can be done. A well-detailed letter of explanation will be required. I would check with a mortgage lender and explain the circumstances before proceeding.
Refinancing Owner-Occupied Home and Keeping As Rental
If you recently refinanced your owner-occupied home and are trying to purchase another home and really plan in living in the new home, you can get a mortgage loan as an owner-occupied home under certain circumstances. Only if the deal makes sense. Homeowners who are planning on buying a new primary home and the new home is much larger than the recently refinanced owner-occupied home and did not have the intent of defrauding the mortgage lender.
Can I Buy Another Primary House After Refinance?
People change their minds all the time. It is totally normal to refinance an exiting owner-occupied home with the intent of living there and planning on doing a large room addition.
How long do you have to wait to buy another house after refinancing? After purchasing a home or refinancing your current mortgage, you must normally wait six months (for a refinance) or twelve months (for a home purchase unless you sell your present principal residence) before you can qualify for a new mortgage.
But later changed their mind and decided to sell it or keep it as a rental and buy a new primary home. In cases like this, it is totally alright.
Using Potential Rental Income On Exiting Home
For homeowners who have currently refinanced their owner-occupied home but need rental income to qualify for a new owner-occupied home, the lender will require a lease from a renter. Need at least 25% equity in the home. Then, 75% of the current rental income can be used as qualified income when buying a new primary home. Homeowners who currently have a conventional loan on an owner-occupied home can qualify for both a conventional and/or an FHA loan when buying a new primary home.
Can I Refinance and Get a New Loan At The Same Time?
If a homeowner currently has an owner-occupied home they can use 75% of the potential rental income on the exiting home to qualify if they have at least 25% equity on the exiting property.
Whether you want to free up your budget or take advantage of lower interest rates, you may be wondering, “Can I refinance my mortgage and auto loan at the same time?” It’s entirely possible to refinance your mortgage and car loan together, but you’ll want to carefully consider your options before doing so.
If the homeowner is short on the 75% loan to value of the exiting property, they can pay the mortgage loan balance down. So the LTV is 75% if they want to use 75% of the potential market rental income as qualified income.
Distance Requirements When Buying New Primary Home
If the new home purchase is close to existing home and similar in market value, then it will be difficult to buy the new home as an owner-occupied home. The buyer will need to purchase it as an investment home and the minimum down payment requirement will be a 20% down payment. Second homes require a minimum of 10% down payment. Need to be at least 60 miles away from the primary home. Or the second home needs to be in a resort area such as Disney World or waterfront property.
Two FHA Loans at The Same Time
Home Buyers can have two FHA Loans at the same time only if they need to relocate due to job relocation that is above and beyond travel distance. HUD allows existing homeowners with an FHA Loan to get qualified for another FHA Loan when buying new primary home. This only holds true if the job relocation is at least 100 miles away or in a different state.
Homeowners who recently refinanced their home but had an unexpected job transfer or a new job that is beyond commuting distance can qualify for a new mortgage loan on the new property as an owner-occupant with a second FHA Loan. Borrowers can have two FHA Loans at the same time with a job relocation that is greater than 100 miles from their current home. They do not have to sell the exiting home and keep it as a rental with an existing FHA Loan.
Buying New Primary Home With Contingency of Selling Existing Home
Homeowners who need to sell their existing homes to get the cash to put down in buying a new primary home can contact us at Mortgage Lenders For Bad Credit, Inc. to learn more about our short-term bridge loan program on their exiting home. Mortgage Lenders For Bad Credit, Inc. offers a 90-day bridge loan program where we can advance mortgage borrowers the equity on their exiting property so they do not have to have simultaneous closings.
New home buyers no longer have to place contingency that they need to sell their departing home to get the cash. Mortgage Lenders For Bad Credit, Inc. will offer a short-term interest-only bridge loan. The exiting property needs to be listed. Our company will lend equity in the departure property for 90 days. Once the property is sold and closed, the homeowner can pay the bridge loan.
