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Refinacing home to offer cash to by a short sale

We have a home in a very nice area with good schools.  We want to rent it out after buying new place.  We figure that it is worth 350 - 375 and we owe 87k.  Would the interest rates be very much higher if we cashed out some of our equity to purchase a new residence.   Someone told us to not tell the lender that our current house wouldn't be owner occupied and that we just wanted $$$.   It seems to me that they would find out and I really want to be up front about the refinance.

Thanks, Curt
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April 25 2012 - Issaquah
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Not being up front with the lender is fraud. If you do tell them the home will be a rental, the odds are they interest rate will be a bit higher. 
This might still pencil for you in the long run as interest rates are at historic lows. 
Short sales are never a sure thing so you might not actually be buying a home in the end, particularly if the agents involved don't know what they are doing. 
Do you have a home in mind to buy? I would make sure the listing agent in particular is an experienced short sale agent and has negotiated numerous short sales and has a good track record with the lender(s) who you are dealing with on this transaction. 
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April 25 2012
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Thanks,

The agent that we have does seem to have been involved in multiple short sales.  If you offer cash does it seem to make the process go smoother?  And then also be a lower offer?  The house was vandalized and to get a mortgage it would have to be one that includes a rehab loan, which I heard are harder to get.  And also we would want to do a lot of the fixing ourselves.

One good thing is that if they accepted our offer we could get a short term loan from a family member and then go through with the refinance.  Or is there a better way work the timing of the payment.  Thank you for the excellent advice.  Curt
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April 25 2012
No you should be absolutely honest.  Take out a HELOC for the down payment on the new place and you will have to qualify for both payments but this is the honest and legal way to do it.  I have done this for multiple clients.
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April 25 2012
You won't find anyone here that will tell you to break the law.
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April 25 2012
 
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