I just refi’ed my residence that I have lived in for 4 years. I want to buy a new house to owner occupy and rent out my old house. Will this come up as an issue to get primary residence financing since I just refi’ed my current house?
I dont think there’s an issue but want to verify
I actually did exact same thing recently. When I refinanced my last home, I lived in the home for 6 months before renting it out and then getting a primary resid. loan on a new house I moved to.
I would check with your current lender on the details of the loan you just refinanced. I know some lenders require 6 to 12 months before going for a new loan. If not, they may have an issue unless the new ‘rental’ will be converted to an investor loan (usually only 1 point difference in the loan).
Hope that helps…
hmm I’ll check with them.
how would they know I got another place and rent my old house out? Assuming I use a different lender for the new house…
how would they know I got another place and rent my old house out? Assuming I use a different lender for the new house..
Your credit report will show the other mortgage.
Why would my current refi lender run my credit? Or the new lender I finanace the new house would run credit and check with my refi lender?
The new lender will run your credit and see the other mortgage. The current lender would not see until they had something that would alert them to transaction
Ok so you’re saying when the NEW lender runs credit and sees the recent refi, they might not approve the transaction if there is a window they require me to wait?
Currently I want to put a contract on a place. If financing gets denied via the NEW lender, would I get earnest money back?
If memory serves me correctly, your new lender will give you credit for 75% of your incoming rent to offset the underlying mortgage payment on your rental house.
So if your rent is $1000 and the PITI payment is $750 it’s a wash. Any larger spread will count towards your net rental income.
But if the rent is $1000 and the PITI payment is also $1000 then they will consider you negative cashflowing -$250/mo which will count against your debt ratio.
Correct me if I’m wrong. It’s my understanding that lenders allow 75% of your rents to count as income. That amount plus any other income will be added together but still have to meet the lenders front end ratio.
For example: Front end Ratio 33%
Gross Monthly Income from Job: $3000
Income from Rents: $1000 X .75 $ 750
___________
Total Gross Monthly Income $3750
Multiply by front end ratio X .33
____________
Max PITI for new home $1237.50
Back end ratio 45% (total debt) 3750 x .45= 1687.50
1687.50
-1237.50
$450
In this example the mortgage on the first (rented) house and any other debt would have to be $450 or less.
JP
Well, I can’t rent my house out until I move into a new house.
I’m guessing they’re not going to give me rent income based on projected rents?
Sorry, but neither you nor nsu1997 have it quite right.
In a nutshell, the lender will take 75% of your rental income and subtract 100% of your recurring rental obligations to determine your cash flow. A positive cash flow amount is added to your income and a negative cash flow amount counts as a liability for the DTI calculation.
At a minimum. the lender will include PITI, PMI, and HOA fee in the recurring rental obligations.
That’s what I meant to say I think (hahaha)