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Renting current home and buying a New Home.

I own a 2 family rental that I bought in 2007.  I do not currnetly rent half out.  I live in both and have been working to fix it up.  The property is fixed up and much nicer than when I bought it but due to the market I've not gained much equity.  The thought was originally to convert back to a single family.  I've decided its not worth the investment.  I'd like to instead rent it out as a 2 family and buy a new home. I have more then enough in the bank for a 20%down payment on a new home with money to spare. My wells fargo lender told me I would need 2 years tax return showing this property as a rental.  Otherwise I'd have to qualify for both loans.  Which did not leave a lot on options.   Looking on here it looks like somethimes that is not the case.  I could do  20% down on the new home with enough in the bank to cover the cost of both mortgages and taxes for a year so I feel like there might be some one out there willing to work with me.  Any advice of what is possible would be great.  I'm in the Waukesha, WI area.   Looking for lenders or recomendations of lenders. 
Thanks, Mike
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August 13 2013 - Waukesha
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Answers (3)

I agree something can get done.  Guidelines are a lot tougher regarding moving out of place but do vary slightly even from Fannie Mae to Freddie Mac.I think your case would be stronger if you were to get at least one side rented now.  However if the income is not needed which based on your reserves/down payment I am guessing the rental income is not needed which might make it a mute point. 

Contact me if you would like me to pursue.
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August 19 2013
Mike,

I am not in your area, but encourage you to contact a direct mortgage lender who does business in WI.  Given the fact that you have a year's worth of reserves AND that you are putting 20% down, I believe you will be able to get financing (if ratios are in line).

It is true that there are many times the lack of experience as a landlord will impact qualification for a new purchase.  However, it is also important to understand that this is a "new" guideline since the implosion of property values in 2008 and 2009.  Prior to the meltdown, it was pretty universal for a lender to use 75% of the proposed rent to offset the PITI of the current mortgage, taxes and insurance...and either provide the surplus as income, or the deficit as debt.

That said, I do see current guides relaxing a bit....not back to the 2008 and prior level...but, certainly, more flexible. BTW, I would work with a mortgage banker...not a big retail bank. Just MHO.

All my best,

Deborah
NMLS #29125
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August 14 2013

Wells Fargo, in my experience, has been very difficult to work with. 

Find a local agent you trust. Ask them for a recommendation for a LOCAL lender. I do believe you need to show rental history unless its a VA loan. But, I thought if you didn't, you just needed 6 months reserves in the bank and have a lease starting immediately. Maybe it varies by area.

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August 13 2013
 
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