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Profile picture for Kenbochen80

Buying a second home, renting out our first home. Mortgage type?

We bought our first home in 2009 around 550K with 220K down. We are now expecting a new baby and want to move down the street ( same community) into a bigger house with one more bedroom. That REO bank owned house is for sale now at 500K.

We want to rent out our first home. The rent can easily cover the mortgage + HOA + property tax. 
We have 20% down payment in cash (100k) for the house we want to buy, but can we get a primary residence home loan ? or does it have to be Investment Property?
we've heard that we could not qualify for a second home loan due to the distance.

Please advise, thank you 
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August 12 2011 - US
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Answers (7)

Profile picture for kimber3265
what is the distance issue?  I have a property that is 90 miles apart.
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May 30 2013
It sounds to me like it can work as well. 

How to best use down payment to make the numbers work?  Work with your mortgage professional.
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August 13 2011
Welcome.
It sounds like you will be able to make this work. Also, there are lenders that don't require the property to be rented immediately. You would be charged for an appraiser to give them a rental survey (Form 1007) of rentals in your area. About $250.00 to $300.00

Happy funding, Rudi
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August 13 2011
The circumstances will allo you to qualify the new home as a primary residence (larger famly/house).  The big question will you be able to count the rental income from your current home to offset the mortgage payment.  In order to do that you would need to have at least 30% equity in your current home.  Based on the down payment you made the answer would be yes.  However if your house dropped in value at all, there may be an issue.  A drive by appraisal will be done to determine the value and you would be allowed to pay down the mortgage if necessary to qualify
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August 13 2011
Profile picture for Kenbochen80
Thank you both for your help

What is the DTI we need to qualify for both mortgages? 

Current Monthly Debt including current mortgage : 2400

Income : 8000 / month

Fico score : 795 ,790, 800 ( last month)

we have enough cash in savings to put down 30% downpayment on the new home. (150k)

would that help?
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August 13 2011
You would be buying a new primary residence. The house you are vacating becomes investment property.

To count rental income in your DTI requires 30% equity in the rental property. You don't have that. You will need to qualify with both payments PITI and HOA dues.

Happy funding, Rudi
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August 13 2011
The rent may cover the mortgage but you will not be able to count it. Can you qualify with both mortgage payments, assuming you get around the distance issue?
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August 12 2011
 
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