Sacramento

[Mojoe24]

My wife and I are looking to possibly purchase a second home, while holding on to our first home since it is an ideal rental property: 3bedroom 3.5 bath townhome, 2007build, remaining 200K principal is maybe 15-20K off from being equal to current market value (going off of recent comps sold within the last 3 months)

I bought our first home in June 2008. *Please note, my wife is not on the mortgage or the title for the first home [more on this disclaimer below]. Not sure if this makes a difference as well, but the first house is under an FHA loan.

We would like to keep our first home and utilize it as a rental property, but what I am trying to figure out is what is our best pathway to consider when filing a new loan application:

....Do we:

A) File together as a Borrower/Co-Borrower, utlizing joint income, and simply declaring our existing home as a debt liability and see what happens (with the notation that we "intend" to rent it out...)

B) Have my wife attempt to be the sole Borrower on the loan application for a new house (we believe she can qualify on her own income, excellent fico, only 1 car loan debt <20k). [remembering, she is not on the current mortgage/title]

C) Attempt to rent out our current home BEFORE doing the loan application, to be able to show lease history on the existing property before filing a new loan app (not sure if this has any advantages as all?)

Any and all thoughts appreciated.

[reelestaterooki]

Hey Mojoe,

Let me tell you my personal experiences.  Unless you have enough income to cover both mortgages+reoccuring monthly expenses, you'll need to get that first house rented out as soon as possible.  The rent needs to cover the property's mortgage, property tax and insurance.  In addition, banks will not count 100% of rental income because rental properties are not rented out 100% of the time.  Banks will consider approx. 75% of rental income, so, that 75% needs to cover rental expenses.  I know of 1 major bank that requires the customer have at least 2 years of landlord experience - your previous tax returns are your proof.  It's very hard now a days to get a loan. 

If you are legally married, banks will consider their spouses liabilities.  California is a community property state. 

I hate to be the downer, but you'll need to contact banks as soon as possible so you can plan accordingly.  Best of luck to you!

[madman57]

My wife and I  are considering the same options. Most if not all lenders state you must have at least 2 yrs. history of being a landlord. Wow have things changed. We have 1 home which we have history for and are considering making our primary home a rental also. We are being told that we must have the income and 6 months (piti) reserves for above 2 homes and 20% down, 2 months reserves (piti) for our next purchase. All of which we have. Credit scores are over 790 for each of us. In my opion you should get going in the landlord business asap because you'll need to provide 2 years tax returns at some point.

Good Luck

Mark