Posted on: 01st Aug, 2009 10:46 am
Hi there,
DH has new job and we need to move to a larger city. We currently live in a house with 6.25% int rate. Since the market is so lousy we are thinking of refinancing this house to a 5/1 ARM (yes I know all about them - had one before - worked for us because we move all the time). We would like to rent this house out (our realtor friend says this house would be a very easy rental - golf/country club community) We then would like to purchase a new home. We have excellent credit score (700) and great Debt to Income Ratio (28%). Is refinancing this home that we currently live in/renting it out and then trying to obtain a new mortgage looked upon negatively by mortgage companies?
Thanks in advance for some input (we've never rented out a house before so this is all new to us)
PW
DH has new job and we need to move to a larger city. We currently live in a house with 6.25% int rate. Since the market is so lousy we are thinking of refinancing this house to a 5/1 ARM (yes I know all about them - had one before - worked for us because we move all the time). We would like to rent this house out (our realtor friend says this house would be a very easy rental - golf/country club community) We then would like to purchase a new home. We have excellent credit score (700) and great Debt to Income Ratio (28%). Is refinancing this home that we currently live in/renting it out and then trying to obtain a new mortgage looked upon negatively by mortgage companies?
Thanks in advance for some input (we've never rented out a house before so this is all new to us)
PW
there are 2 options:
Renting: you can use rental income to pay mortgage. since you have good credit score & debt to income ratio (which i donot feel to go up much)
Refinancing: you can thibk about it as you will get mortgage easily below 5.25% for 30 yrs loan. since right now rates are in lower range, i think you need not to try for 5/1 ARM. secondly, what will you do with this property as you are moving out to other city? think about it. you can rent it to earn out of it.
Renting: you can use rental income to pay mortgage. since you have good credit score & debt to income ratio (which i donot feel to go up much)
Refinancing: you can thibk about it as you will get mortgage easily below 5.25% for 30 yrs loan. since right now rates are in lower range, i think you need not to try for 5/1 ARM. secondly, what will you do with this property as you are moving out to other city? think about it. you can rent it to earn out of it.
pw, one thing to keep in mind is that in order for a lender to consider your rental income as part of qualifying, you'll have to prove that you have at least 30% equity in that property, and you'll have to be able to document that the rental is a market rent. if you qualify for the new purchase without the rental income you're better off - call the existing property a second home and move on from there.
i think william misunderstood the deal here - you're doing both refinancing and renting; he is right in thinking, though, that fixed rates are in a lower range of rates at this time. you might be as well off with a fixed rate as the 5/1 arm, but you can determine that in your shopping.
other than that, you've thought this through and it seems you're on the right path.
i think william misunderstood the deal here - you're doing both refinancing and renting; he is right in thinking, though, that fixed rates are in a lower range of rates at this time. you might be as well off with a fixed rate as the 5/1 arm, but you can determine that in your shopping.
other than that, you've thought this through and it seems you're on the right path.
