The Money Mustache Community
Learning, Sharing, and Teaching => Real Estate and Landlording => Topic started by: OracleOfAtown on December 23, 2014, 09:26:03 PM
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Does anyone out there know how to go about purchasing a 2nd home without having to sell home im in now. I want to rent out home im in now and buy another. I cant show any rental income until I buy the other house. I just dont know how to pull it off.
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Can you afford to carry both homes if your rental is vacant for a few months? Does your debt/income ratio after the purchase of the second home income fall within FHA guidelines? Since you will not have proceeds from selling your current home a bridge loan is not an option. I think most conventional lenders want to see a 2 year rental history for the rental income to be included in the affordability calculation. Check the FHA guidelines to determine the rental history they need to include it in your income. I believe they will use 75% of your rental income to help you qualify for a loan. You may need to move your belongings into storage and crash with friends or family for a few months so that you have documented rental income (or perhaps just a signed lease will suffice). A local portfolio lender in your area may be more flexible but may require a larger down payment. Good luck.
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In order to buy a second home without selling the one you own, you need to work smart. Find a tenant for your home and look for a new apartment to buy. Make sure that you take advice from an agent who can guide you throughout the process.
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Make more money so you can qualify.
-W
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My parents just did this and all they needed was a signed lease and a bank statement showing that first month's rent + deposit was deposited into their bank account. My dad said that doing it that way cost about .5% higher than a conventional loan. The timing of this is tricky. As a result, the suggestion about an apartment might make sense. It seems like it would be less stressful.
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Thanks everybody for your help. Good call Waltworks.