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Renting current home and buying another?

My husband and I currently own a condo close to downtown Denver. We are considering purchasing a house in the southern suburbs, which would be closer to my work and give us more room to start a family. However, I would prefer to not sell the condo and to rent it out instead. The market is on the upswing and prices in the building have been climbing steadily. I would like to keep the property until it settles. I know we could rent it for enough to cover the mortgage+HOA.

Unfortunately, we only have enough cash to put about 5% down on a new home if we keep the condo. If we sold the condo, we would likely generate enough cash from the sale to put down 20%.

Does anyone know if it is possible to get approved for a mortgage on a second home (which would be our primary residence) with only 5% down? Would it drastically affect our interest rate? Is taking out a home equity loan on the condo to cover the down payment on the new home an option? I know we need to talk to a mortgage broker, but we're still in the early phases and I would like to know if we need to be preparing to sell the condo if we hope to move.

Thanks!
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January 02 2013 - Denver
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Answers (5)

I am sure that you can qualify for a second home mortgage loan, but the first think that you should do is contact a mortgage broker that can explore all your financing options and give a pre-qualify letter for the amount that you can afford. Mortgage broker have acces to many banks, private lenders and different programs.
All the Best,

Maria Cipollone
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January 23 2013
Yes this may be very possible.
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January 03 2013
Yes, you only need 3.5% down for an FHA loan. Im with Ofe, call a mortgage broker and they can run you through the scenarios. I can send you some names if you'd like. I think the big thing to consider right now is taking advantage of the super low interest rates available, which allows you to buy much more house today than ever. The mortgage broker can show you if it makes sense to put the 20% down by selling the condo or not. Best wishes and let me know if you have other questions!
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January 02 2013
Call a few mortgage brokers and let them give you some advice, it may bes doable. 
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January 02 2013
Yes what you describe is possible with 5% down and the fact that you are keeping your condo won't have any effect on the interest rate. Is your income sufficient to cover both payments? 
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January 02 2013
 
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