Posted on: 25th Feb, 2010 09:07 pm
Greetings,
I currently own a home, which unfortunately is upside down by 75,000 dollars. I plan on renting my current home out for approximately 1300 per month. My current mortgage liability is about 1600 per month. My yearly income is approximately 120,000 per year. My monthly debt is as follows: 500 car payment, 100 school loan, and 100 car insurance. My question is how much can I get qualified for based upon renting my current home for.
Thank you
I currently own a home, which unfortunately is upside down by 75,000 dollars. I plan on renting my current home out for approximately 1300 per month. My current mortgage liability is about 1600 per month. My yearly income is approximately 120,000 per year. My monthly debt is as follows: 500 car payment, 100 school loan, and 100 car insurance. My question is how much can I get qualified for based upon renting my current home for.
Thank you
If you plan on renting your current home, then what you are intending to do is buy a new primary residence....not a second home. That changes things a bit in your favor.
The best way for you to qualify is to get rid of your car payment and have a lease already signed so you can prove that you will get that rental income.
The other factor is of course the price of your new home and the amount you have for a down payment plus reserves.
Without the rental income and without paying off your auto loan, you could qualify for a $300k loan assuming your taxes are around $3k and your rate is 5%. The bigger issue is whether you are comfortable with the payment.
The best way for you to qualify is to get rid of your car payment and have a lease already signed so you can prove that you will get that rental income.
The other factor is of course the price of your new home and the amount you have for a down payment plus reserves.
Without the rental income and without paying off your auto loan, you could qualify for a $300k loan assuming your taxes are around $3k and your rate is 5%. The bigger issue is whether you are comfortable with the payment.
Regarding the rental property, make sure you have a fully executed lease and proof of the security deposit. The car insurance doesn't count toward your DTI. $300K sounds reasonable....maybe more depending on the taxes and insurance on the home.
Eric1 is correct, you're looking at a new primary residence not a 2nd home.
Under the buy and bail guidelines, lenders will no longer use a lease agreement as proof of rent unless you have 30% equity in the home so in your case, the entire mortgage payment from your current loan will be calculated in to your debt to income ratio without the benefit of the rental income.
The other thing to consider will be the type of financing.
If you go with a conventional loan, you'll need 5-10% down and your debt to income ratio will be capped at 41% due to pmi guidelines.
FHA only requires 3.5% down and is a little more forgiving on the debt to income ratio but you will have county loan limits to deal with which will determine that max loan amount that FHA will insure.
Under the buy and bail guidelines, lenders will no longer use a lease agreement as proof of rent unless you have 30% equity in the home so in your case, the entire mortgage payment from your current loan will be calculated in to your debt to income ratio without the benefit of the rental income.
The other thing to consider will be the type of financing.
If you go with a conventional loan, you'll need 5-10% down and your debt to income ratio will be capped at 41% due to pmi guidelines.
FHA only requires 3.5% down and is a little more forgiving on the debt to income ratio but you will have county loan limits to deal with which will determine that max loan amount that FHA will insure.
