Moving the primary home

[Pandu Chimata]

Hello team, I currently own a house and been living since 13 years. Its time to downsize as kids moved out of the house. 

If I buy another house/condo, smaller than I live currently , would that be considered as a primary home? How does the lender treats my next home as a primary home and what kind of documentation I need to provide for that?

Another question is - If I buy that house or condo in cash (off market for a quick close), and then can I turn around get a mortgage as a primary house, obviously keeping 20 to 30% equity in the house? 

Please help me address the above two questions. Appreciated. 

[Erik Estrada]

Quote from @Pandu Chimata:

Hello team, I currently own a house and been living since 13 years. Its time to downsize as kids moved out of the house. 

If I buy another house/condo, smaller than I live currently , would that be considered as a primary home? How does the lender treats my next home as a primary home and what kind of documentation I need to provide for that?

Another question is - If I buy that house or condo in cash (off market for a quick close), and then can I turn around get a mortgage as a primary house, obviously keeping 20 to 30% equity in the house? 

Please help me address the above two questions. Appreciated. 

 Hey Pandu, 

As long as you can show an underwriter that you have a valid reason for downsizing, you should have no issues financing this under a conventional loan as long as your DTI allows for it.

Do you plan on renting out your current primary or keeping it as a second home? 

[Jason Potrzeba]

Fannie Mae uses the term "Delayed Financing" to describe paying cash for a home and then applying for a mortgage to recapture some of those funds. You should have no issues if you apply and close within the first 6 months of making your new home purchase.

Here is info from Fannies sellers guide...
What is required for a delayed financing exception? (fanniemae.com)

[Pandu Chimata]

Quote from @Erik Estrada:

Quote from @Pandu Chimata:

Hello team, I currently own a house and been living since 13 years. Its time to downsize as kids moved out of the house. 

If I buy another house/condo, smaller than I live currently , would that be considered as a primary home? How does the lender treats my next home as a primary home and what kind of documentation I need to provide for that?

Another question is - If I buy that house or condo in cash (off market for a quick close), and then can I turn around get a mortgage as a primary house, obviously keeping 20 to 30% equity in the house? 

Please help me address the above two questions. Appreciated. 

 Hey Pandu, 

As long as you can show an underwriter that you have a valid reason for downsizing, you should have no issues financing this under a conventional loan as long as your DTI allows for it.

Do you plan on renting out your current primary or keeping it as a second home? 

 Thank you! I plan to rent the current home after some upgrades.

[Pandu Chimata]

Quote from @Jason Potrzeba:

Fannie Mae uses the term "Delayed Financing" to describe paying cash for a home and then applying for a mortgage to recapture some of those funds. You should have no issues if you apply and close within the first 6 months of making your new home purchase.

Here is info from Fannies sellers guide...
What is required for a delayed financing exception? (fanniemae.com)

Thank you! I assume there will be a difference of interest in taking the purchase loan vs "cash out refinance or delayed financing". Is that right?

[Jason Potrzeba]

Yes, the cost and/or rate may have a slight adjustment because it isn't a purchase mortgage.

[Erik Estrada]

Quote from @Pandu Chimata:

Quote from @Erik Estrada:

Quote from @Pandu Chimata:

Hello team, I currently own a house and been living since 13 years. Its time to downsize as kids moved out of the house. 

If I buy another house/condo, smaller than I live currently , would that be considered as a primary home? How does the lender treats my next home as a primary home and what kind of documentation I need to provide for that?

Another question is - If I buy that house or condo in cash (off market for a quick close), and then can I turn around get a mortgage as a primary house, obviously keeping 20 to 30% equity in the house? 

Please help me address the above two questions. Appreciated. 

 Hey Pandu, 

As long as you can show an underwriter that you have a valid reason for downsizing, you should have no issues financing this under a conventional loan as long as your DTI allows for it.

Do you plan on renting out your current primary or keeping it as a second home? 

 Thank you! I plan to rent the current home after some upgrades.

 Got it. What usually helps is having the property leased out already to show you aren't going to live there anymore. But a strong LOE should suffice. 

[Alex Hunt]

Will you sell or rent your current home? Depending on the market a LTR or STR maybe a good option for long term gains vs short term gains on a sale. There are many options here

Yes the new home can/will be used as your new primary, allowing you to get a Invesment cashout refinance on the "old" primary if you wish.

If you buy a new primary in cash, yes you can get a 80% refinance on that cash price.

Would be happy to connect more on this!

[Jared Rine]

@Pandu Chimata...seems like you got some good answers but I'm going to add my $0.02, as an active mortgage broker in CA. Yes, smaller property should be treated as primary because your story makes sense - u/w'er will likely want a letter of explanation, nothing more. If you do buy in cash, yes you still should be able to turn around and refinance. If you're turning your new house into a rental, and you need income to offset the mortgage and you don't have a lease yet, the lender will need to get a 1007/rent schedule for the house you're leaving/old primary so you can use 75% of that number to use as income/offset the PITIA, so it doesn't hit your DTI as hard. Hope that helps, even if you've found what you're looking for already.