Do you own a home and thinking of moving to a new one? If this is you, then this article should be of interest to you. With so many homeowners desperate to sell their home to get into another one underwriters at every mortgage lender across the US are seeing an increasing trend of fraud around rental agreements, sales contracts etc. As a result, there have been some recent changes in how a homeowner will be qualified to buy a new home while they still own one.
As A Homeowner And Buying A New Home In The Past
Without going into specifics, in the past, if you were a homeowner and looking to buy a home you could qualify for a new mortgage if you were able to show that your current home was rented proven by a rental agreement. You also needed to show the sales contract for the new home. Now, since the changes to the mortgage industry and the increasing evidence of fraud underwriting qualifications have gotten stricter.
Being a Homeowner And Buying A New Home Now
In general, to qualify for a mortgage in late 2008 as a homeowner who will still own your home at the time you buy a new one you will have to have enough income to cover both mortgage payments sufficient enough to be able to meet debt to income ratio underwriting guidelines.
Keeping Your Property As A Rental
If you are able to rent your home and prove it to the mortgage company then you may be able to use the rental income to help offset the debt from your current mortgage company.
- If you are relocating to another area that is outside of a reasonable commuting distance from your current home and you have a fully executed lease from a tenant who is going to live in your current home after you move then you may be able to use about 75% of the rent that you are expecting as income to help you qualify for your new mortgage. You may be asked to provide proof that you have received a security deposit and perhaps even the first month of rent.
- You will most likely have to prove that you have at most a 75% loan to value ratio with your current mortgage balance and the value of your current home. You may have to get an appraisal to prove this, or the mortgage company may work off your previous purchase price. Your mortgage company will let you know their specific requirements.
Selling Your Home But It Is Not Sold Yet
Selling is a valid disposition of your current home if you are buying a new one. Unfortunately, if you are buying a new home and still own your home your loan qualification will depend on whether you meet debt to income ratio guidelines when considering both mortgages – the one from your current home and the proposed one from your new home.
If you are looking to purchase a home while you are selling yours, make sure that you do not put any money down on a home as a deposit until you have met with a mortgage company to determine if you qualify with both mortgage payments included in your debt ratios.
Hopefully, this has provided some insight into how to qualify for a new mortgage while you own a home. If you have further questions about qualifying for a home while owning one that is up for sale, please ask EdGAR.
