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I want to rent my current home and purchase a new home.

My home is 3 blocks from the local campus and I believe it would be very easy to rent.  Our loan to value is at about 68%.  We have been negotiating a refinance because rates are so low right now.  We have considered using this opportunity to pay off other debt; however, this would raise our loan to value percentage.  It is an attractive idea because our mortgage payment would remain the same; however, I do not want to ruin our chances of purchasing a new home and using our current home as rental.  
Can anyone tell me what the general requirements would be (amount of savings, loan to value ratio, income to debt ratio)?
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January 09 2011 - Stillwater
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You need to talk to a mortgage professional to get the answers to those questions. I would be cautious to move forward with a refi if you plan on purchasing a new home in the near future. There is a waiting period (maybe 90 days) before you can get a new loan.

I think this is brilliant and everyone should consider doing this--we are calling it the "Move-Up Investor". In a lot of cases the lender will allow you to count your rental income for the property to qualify for the loan. 

The only advice I can give towards renting is to get your numbers straight to make sure that you are able to cash-flow the property by at least $100-200. Take into consideration landlord insurance, rental reserve (when it is vacant), repair reserve or a home warranty when you are running your numbers. 

Good luck! 

Warmly-

Patrick

P.S. If you need a referral for a great Realtor, please let me know and I can point you in the right direction.[contact info removed by moderator]

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January 09 2011

In order to use rent from your current home for qualifying purposes on the purchase of a new home most lenders will require you to have 30% equity in your current home. The down payment needed for your new home can vary greatly depending on the situation, with 3.5% down or less if you are eligible for any down payment assistance programs. However to avoid mortgage insurance you will need to put down 20% or more. Debt to Income ratio's typically will need to be under 45% but can be approved at higher ratios with compensating factors such as assets in reserve, higher down payment, credit factors, etc.  

For more detailed information, please feel free to contact me.

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January 09 2011
I strongly advise you to consult with a local licensed Lender.  Many changes have been made over the last year in regards to rental properties.  I would certainly put a plan into place before a refinance and know all of my options.
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January 09 2011
Contact a local lender and real estate professional.  Combining their expertise they should be able to give you the best advice. 
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January 12 2011
It can be tricky as to what you'll need to put down on the new home where you wish to live.  Talk to a professional lender to get the details on the how's and what's of making the transaction work smoothly!
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March 04 2011
 
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