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Rental Survey instead of Rental Agreement & Security Deposit

Hi, there,

I am looking to purchase a second home, make that home my primary residence, and rent out my existing home in San Francisco. I was told that I would need to have a rental agreement and security deposit by close of escrow.

I am hearing that some lenders will accept a rental survey in place of a lease & secuirty deposit. Can you let me know who these lenders are?

Many thanks in advance for any advice you may have to offer.

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May 30 2013 - San Francisco
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Greg,

Thanks a mill for your response. The lender is requiring this before close of escrow, so our concern is, having to find renters being under such a tight timeframe. Another  concern is if we don't secure renters by close of escrow, we lose our 3% initial deposit.
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May 30 2013
Mike,

Jumbo loans are conventional. They are not "conforming", but they are conventional. People get those two confused all the time. 

Anywhoo, that is a pretty common guideline these days for conventional loans. Since it is not a conforming loan your lender does not have to conform to Fannie Mae or Freddie Mac's guidelines, which do require a signed lease agreement and proof that the security deposit has been transferred to the owner, so it sounds like the lender you are working with has that guideline for this program. It is not something that is going to be uniform from lender to lender. 

The issue I have is, they should not be requiring this before approval. Usually you just have to have this by close of escrow. Some lenders can be more strict than others though. It really all depends on who you are working with and what their/their investor's guidelines are when it is not a loan like a conventional or FHA that has uniform guidelines. 

Not sure how much that helps but if you want us to take a look at it we'd be more than happy to. 

Sincerely,
Greg
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May 30 2013
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thank you very much Mike for your answer. much appreciated.
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May 30 2013
Actually, you're preapproved for a Jumbo, not conventional, loan, what with the loan amount being over $625,000. That being said, you're running into what is referred to as "departing home" guidelines. In order to offset the debt from the departing home, you clearly meet some of the guidelines, but you would need to have the tenant identified, a lease agreement and proof of deposit, by the time the loan funds (usually), not before approval. But that appears to still not fit your needs.

I've not seen any one use a letter of intent to replace the above requirements but perhaps there are lenders that might consider it. My .02 uis that you won't find it, so you may want to consider preparing the place for rent first before you actively hit the market.
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May 30 2013
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conventional 30 yr fixed. Our credit is great (both over 800), and our equity in our current house is high (58%).
 
Recently, we went for a place that was at the very top end of our range at $720K (this is a $900K offer minus the 20% down payment). That being the case, getting a loan was a challenge. Our DTI including our current place and the new one was 51%, and the broker we were using said it needed to be under 45%. The broker found several ways that we could secure the loan—all of them involving using the rental income that we were expected to get from our current property—but they all involved paying a lot more money, so none of them were feasible on our end. We finally were able to work out the best deal possible: 20% down, no PMI, and one loan at a reasonable interest rate. But because we needed to include the rental income in order to secure the loan, we had to produce a signed rental agreement and proof of a security deposit BEFORE the loan could be approved. As I understand it, this is fairly common, but it was something that was just not acceptable to us. We will be first-time landlords, and we want ample time to move out, gussy-up the place and screen applicants. We don't want to be on an accelerated time schedule doing this.
 
A last-ditch effort by the broker was made. He proposed offering to the potential lender a letter of intent to rent our current place, the thought being that, with SF's hot market and the relatively nice neighborhood that our current place is in, the lender might accept the letter in lieu of a signed rental agreement.
 
It ended up that the broker couldn't make it work under those circumstances. But he indicated that it was a near miss. So now our question is this: How low would our target price have to be in order for us to be able to use a letter of intent to secure a loan instead securing renters? If it was a near miss at $720K, would it work at $700K? Is this even done at all in the Bay Area?
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May 30 2013
The documentation requirement depends on the type of loan. Are you going conventional, FHA, or VA?
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May 30 2013
 
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