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Switch from residence to rental -- can I refi?

I bought a condo in 2005 as my primary residence.  I have a 7/1 ARM (reset in 2012) and HELOC (no downpayment).  I'm currently at 85% of  the value.  Here is the problem -- I changed jobs and am now working in public interest for, literally, half the paycheck.  I also moved out of town.  I am renting my condo to my brother.  I can make the monthly payments, but would like to refi (both because rates are low and because I don't think the sale market will be great by the time I reset).

Will it be possible to refi since the property is techically an investment property not my primary residence?  My credit score is very good (mid-700s) but debt-to-income ratio is high (low income, student loans).  What is the best way to explore my options?
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March 13 2009 - Capitol Hill
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To refinance your property may be tough, especially like you say that the income ratios are high. Of course, still let a lender review your case and see if it can be done. In case it can't be refinanced I would suggest to explore a modification of your loan. The Obama plan calls for the loan to be a fannie mae/freddie mac loan. That's the first hurdle. Secondly, are you now working really far away from your home? It would help if you could still claim homeownership. Of course, if you claim it as a rental property on your tax returns that would settle that.Hope this helps!
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March 13 2009
MadTP,

The maximum is 80% LTV. Rate around 4.75% with 3.25% Lender Cost for SFR Investment, OUCH! Does this make sense for you? .... Rudi
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March 13 2009
2012 is a long way off.  Hunker down and keep renting.  If it cash-flows, you're doing ok.  Inquiring with your lender about a modification is a good idea.
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March 13 2009

Look to refinance as a second home if you moved out of town.  How far out of town? 

Depending on how long you have been renting your condo, you can claim rental income to offset your DTI since it is high.  That would help qualify for a refinance as a 2nd home. 

Home Affordable has been listed as primary residences only. 

Or as Sam said keep it as is and continue renting.  If you can make the payments comfortably, the market will comeback and when it does, prepare to sell in 2011-2012. 


Hope that helps!

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March 13 2009
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Thanks for the suggestions everyone!  I've only been renting 6 months, but my brother's job in Seattle changed from contract to permanent so I've got a long-term renter.  I did declare the property as a rental on my tax return (since I needed to claim the rental income).

I'll look into the 2nd home refinance option.  It is so confusing now with the various options but it is helpful to have this message board.
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March 16 2009

It will not qualify as a Second Home.

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March 16 2009
You can not claim rental income to offset the payment on a second home.  It is either a second home or rental property?  Rent received on your tax returns will eliminate the second home loan option. 
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March 16 2009
Unless the applicant is self-employed, tax returns are not likely to be required as part of his underwriting package.  Thus, the matter of whether or not rental income is received will not come up.  In addition, a borrower is allowed to receive rental income on a second home property as long as they intend to inhabit the property for at least part of the year - the rental income just can't be included in underwriting ratios for qualification purposes.

Of course, this is likely moot if the applicant's ratios are already tight, since he would have to be able to qualify with both mortgage payments plus any other debt payments.  I have successfully gotten approvals up to about 58% total debt ratio with strong credit, but the MI companies have largely ratcheted their guidelines down to no more that 41% DTI so with the LTV over 80% MI qualification would add another level of complexity to the issue.

Short answer - everyone above who suggests that you sumit an application to a knowledgable mortgage professional is right.  There may be an option for you, but without the total picture to look at, it's all speculation.
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May 22 2009
 
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Switch from residence to rental -- can I refi?
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Latest reply by Roberta Wilkinson
May 22 2009 | 8 answers
  • Posted by madteaparty
  • In Refinance
  • March 13 2009
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