Profile picture for MeganMiller4

Can I buy a second home and rent out my current home?

I own my home now. We owe appx 158,000 on our home that is worth 185,000.
That monthly payment is 1050/month (no escrow)

Monthly Debt is 1840/mo
Monthly Gross is 9166/ month
Husband and I both have mid 700 fico.

Found a bank owned property listed for 285,000 but worth 420000 based on tax appraised values. We would love to be able to take advantage of this incredible buying power right now.

Just getting this process started and dont know if I am wasting my time.
  • December 15 2011 - US
  • 1Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Be a Good Neighbor. Be respectful and on-topic. No spam or self-promotion! See our Good Neighbor Policy.

 
 

Answers (17)

Sunny, your mortgage broker is incorrect. It has nothing to do with 6 months rental history why they cannot use rental income and everything to do with the equity in the property they are vacating. If they had 30% equity, they could use the rental income regardless of previous landlord experience, rental history or anything else. All they would need is a signed lease agreement for the property and a the security deposit, deposited into an account.
  • January 07 2012
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for sunnyview
"i think what your broker meant was that you couldn't use rental income to qualify for the loan without 6 months of history"

That's it is a nutshell, but when I said it...it turned into a plate of gravy :)
  • January 07 2012
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for Caveat Emptor
i would imagine that buy+bail is less of a concern when someone can easilly afford both morts without the rental income and has some equity.

I know that you could get financing if you upped your equity to 30% because that is more or less the standard for investment properties, 30-50% down, but i dont see any reason why you couldn't purchase a second home with that debt to income and be fine, regardless of rental income.

OFC this post is what? 3 weeks old? shame on you sunny.
  • January 07 2012
  • 1Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for sunnyview
My loan broker said that there was too much fraud in the market (mostly buy and bail) so they now require 6 months of rental income paid before they would count it in the ratios for qualification. I don't know if that's typical or not, but that's what the broker said.
  • January 07 2012
  • 1Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Go for it !!! It won't hurt to meet with a Loan Officer first and see where you stand. I was able to that a few years ago. I rented out my town home and showed my rental agreement that covered my mortgage. My income showed that I was able to cover my new mortgage. What helped me was that I had some savings/reserves in the bank that covered both mortgages for a couple of months. Keep Us posted. Best of Luck to You !!!
  • January 07 2012
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

" after you buy the second home, stop making payments and maybe rent it during the process to recapture lost equity." 
----------------------------------------
Wow! A sign pounder actually put that in writing on a public forum? The great thing is I can just send the link to the FREC, I'm sure they'd love to hear what one of their licensees is spouting.
  • January 07 2012
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Banks has caught up on people deceptions. They are calling it 'BUY AND BAIL". Buying a new home and bailing on old one. They are not considering the lease agreement any longer. You will have to buy the new home as an income property with 10% or 20% down payment. Contact a Mortgage Broker for your options. Good Luck
  • January 07 2012
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for timbuck_2
<<<<"If you dont mind a 3 year hit on your credit, you could short sale your home after you buy the second home, stop making payments and maybe rent it during the process to recapture lost equity.">>>>

I would like to buy a second home, but because so many people were being deceptive and purchasing a second home, then letting their first home go to foreclosure (they stopped making payments as suggested above), honest people like me have a horrible time getting a mortgage on a second home. I hope people don't listen to advice like this. This is why our country is in financila dispair.
  • January 06 2012
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

What a great time to keep your current home and to buy another!  There is a need for rental property at this time.  You may find a tenant whose credit is not good right now due to a foreclosure or short sale in their recent past.  They may need three years to reestablish their credit.  They may be great "long-term" tenants until they qualify to purchase again.  Should you find you do not like being a "landlord", they may even be your buyers!
As an aside, the MLS has great data now on what your home should rent for.  Check with your Realtor to get to this information.
  • January 02 2012
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

" after you buy the second home, stop making payments and maybe rent it during the process to recapture lost equity."

What great advice; you are a man of great integrity I can see. I can only hope Megan and others that see your comments will know to avoid working with agents that have no morals or scruples. Your license should be pulled for even suggesting this IMHO.
  • December 16 2011
  • 2Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Keep in mind, tax appraised value may not be market value.Speak with a loan officer first and a lot of your questions will be answered. Most lenders will require 20% down payment on the second home and a signed lease for your first home unless you have the income to cover both. They will also want to see reserves. Again, find an experienced loan officer, a local Realtor may be able to refer you to someone.  
  • December 16 2011
  • 1Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for Bert Pope
You are able to buy the second home, then rent out the other home, hopefully you can break even.

If you dont mind a 3 year hit on your credit, you could short sale your home after you buy the second home, stop making payments and maybe rent it during the process to recapture lost equity.Before you did that, please get a second opinion.
  • December 16 2011
  • 1Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

I agree that you appear to be qualified to buy in the price range you mentioned.  You didn't mention how much cash you have to work with, so that is the only issue I see if everything else checks out. 

The only thing I would add is that a property listed for $280,000 is probably worth around $280,000.  While we all like to scream about banks, they are not in the habit of selling houses for less than they are worth.  Get in touch with a good agent in the area you would like to live and listen to their advice.

  • December 16 2011
  • 1Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

There are a number of factors that need to be determined...... amount of down payment on new purchase, is $1,840 monthly debt in addition to mortgage payment, funds available for down payment, lease on current home (even though rent will not be allowed to off set mortgage) etc.
Before you proceed it is time to get pre approved. If you don't have a referral to a local lender, go to Professional tab above and find a Zillow loan officer in your area/state to discuss being pre approved.
  • December 16 2011
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for GMerino
This should work for you.  With a good explanation as to why you would like to buy another home as your primary residence and what your intentions are with your current residence it should work you. 

Geofrey Merino
  • December 16 2011
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for sryan1980
Yes, you can rent out your first home and buy another at the same time. You will need to submit a copy of the signed lease to the bank to prove that it is rented out. The rental price really needs to meet the currently monthly mortgage payment. And even if it does, your borrowing capacity for the new home will be diminished a bit. Banks know that rental income can be unreliable and they will rightfully be concerned that you will not be able to carry both mortgages in the event that the renter of your first homes moves out or fails to pay their rent.
  • December 16 2011
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.

Profile picture for daveskow
Your debt and income look like it should work
  • December 16 2011
  • 0Yes

  • Report a Problem

    Please enter a valid email address.

    Content flagged

    We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

    We're sorry. This service is temporarily unavailable. Please come back later and try again.