How is the rental property on my ability to buy a new home?

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I currently own a home. I have about $ 228 000 and the value of the house in the current market situation is likely to be current on $ 260 000, although the evaluation and assessment is closer to $ 270,000. My mortgage payment is $ 1,850 a month, and I collect $ 1600 per month rent. My tenant has always paid on time, usually early, so I do not have late payments or anything. I would buy a new house to serve as my primary residence that we are currently renting. Before contacting a banker, I wonder how it affects me in rental property to a new home loan? Did they even have my $ 250 rent a home is a short-term debt covered? I have heard of them, only 75% of what I used to rent and the rest can be considered a debt? Does anyone have input, how does this affect me? Thank you.

  1. Reply
    April 29, 2011 at 11:47 pm

    It will adversely affect you. It’s significant debt plus you’re running a negative cash flow on it.

  2. Reply
    James Groseclose
    April 30, 2011 at 12:42 am

    Yes that sounds about right, the rental income will cover 70-80% and the remander as debt.
    If you and/or you spouse have a 401k you can also transfer/rool over it to a self directed account and then pay off the rental mortgage (if you have enough built up) and have the rental payments rebuild you new 401K and it will be taxed deferred and not considered as debt at all , leaving you free to purchase you new home.

    More Free Info:

  3. Reply
    real estate guy
    April 30, 2011 at 1:07 am

    In order to count the income of your rental, you need 30% equity in the property. Which you do not have. So you will need to be able to have the personal income (non rental) to carry both the rental and the new mortgage. WHY? people would be underwater on the rental and say they would rent it. Then when they got the new house, they would walk away from the rental.

    As for rental income (if it could have been counted). The lender will only use 75% of the rental income. So 75% of 1600 is 1200. Your mortgage is 1850 – 1200 = a 650 monthly debt.

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