Mortgage eligibility with rental property.?

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We have to move to NC for my husbands job by the end of the year. Our house in IL has been on the market for several months and we have dropped the price as low as we can to pay off our mortgage and pay the agents without a penny for us. Unfortunately with all the foreclosures & shortsales in our area we can’t compete and have not been able to sell. We are considering offering our property for lease or lease-purchase but want to make sure we would be able to get a loan to purchase a home in NC. Our income is $ 90,000 current mortgage is $ 2000 a month we would likely get $ 2100 in rent. Can we still get a mortgage for a $ 300,000 home if we rent out our current home. (We have 10% down payment already saved).

  1. Reply
    Tyler W
    May 1, 2011 at 6:04 am

    It should not negatively effect you if:

    1) You have enough money to pay ther new mortgage, and the new mortgage payment is not more than 1/2 of your income;

    2) You either have a renter when you buy the new house, or have enough income so that both mortgages are less than 1/2 of your income;

    3) after you pay both mortgages, and if you have a renter before you buy, if the rent is factored in, you have enough to live on (about $ 45,000)

    4) you have enough money to put down 20% on the new home;


    5) you currently owe less than 80% of the purchase price of you rental when you bought it.

    If one or two of those things are not true, then it will effect you negatively, but depending on how close you are, it may not prevent you from buying.

    I’d suggest renting for a while until you have a renter, and save up enough to make a 20% down payment on thr new house, pay any closing costs, and pay off any second mortgages or credit lines on the first house.

    It sounds like you would need to find a house in NC with a combines mortgage, insurance, and tax payment of less than about $ 21,000 a year, or $ 1750 a month. It might be hard getting a 90/10 loan, but not impossible. there are some federal programs that allow you to buy no money down, even if you can’t get a second mortgage otherwise. You will have to pay mortgage insurance, though. You are probably going to have to rent out the first place first, and then look for a new house to buy, though.

  2. Reply
    dog ma
    May 1, 2011 at 6:07 am

    Talk with a lender in NC first. Most of them require some rental history on the property, and they will only allow a certain percentage of the rent to be considered toward your income – so you will still show a big negative. There are maintenance costs, property management fees, vacancy rates, etc. to take into consideration. Your insurance will go up, and your property taxes will usually be higher on a rental property.

  3. Reply
    May 1, 2011 at 6:32 am

    Whether you rent or have 2 houses doesnt matter. The only thing that matters is your debt ratio. Can your income afford 2 mortgage payments? If not then make sure to get signed lease agreements on your current home first so you can eliminate the 2000/ mortgage payment. They only use 75% of rental income so if you get 2100/monthly then the mortgage company will only use %1575 which means $ 425 will be added towards your debt ratio.

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