Cash-out Refinance on Primary to buy new primary

3 Replies

I'm sure this has been brought up before, but after searching the forums, I'm not sure I see a direct comparison.

I owe about $69k on a property that is worth about $120k. FHA at 6%. Credit score is in the low 700s

I'm looking for a new primary and would like to use this as a rental.  I can probably get about $1400/mo in rent, so it fits the 1% and 50% rules.  

1) If I were to do a cash-out refinance, my understanding is that I would affirm that I plan to stay in it for 12 months. Can I cash-out refinance it into an investment property? I had planned to cash out 80% - or about $96k. $27k cash before closing costs. Would the difference just be in the rate I get? Or the LTV, too? And is there a way to estimate closing costs?

2) My DTI would be about 55%. Is it enough to just get a signed lease for that rental income? I would not have rental history, but it sounds like some lenders will consider it. My mortgage would only be about $500, so I think it would make a good rental. My other concern is the timing in putting in an offer on a house while trying to line up a renter, but that is probably among the least of my problems.

@Jonathan Armoto 1) you can cash out as an investment  up to 75%ltv.  Your lender can give you estimate closing cost.

2) You need sign lease and deposit proof of advance rent. 75% rental income will be count as income.  Refinance transaction will close little earlier than purchase transaction.   

@Harjeet Bhatti Thanks for the response.  I have a little concern about cashing out enough for a down payment and closing costs on my next house.

Do you know how common it is to get a "no-closing cost" cash-out refinance?  I realize that I'd still have closing costs, I'm just want to ensure I have enough cash in hand. Also is it possible to get an appraisal up front before going through the process?

Also, for the timing of the new primary mortgage, would I need a signed lease for pre-approval?  Or could I get pre-approved based on projected rental income and then get a signed lease before the actual loan application?  Would it matter if I were to use a property management company?


Can refi the existing FHA to a conventional investment property at 75% LTV.

You would then use vacating rental income to qualify on the new primary purchase, lease shouldn't be required to close.

Can purchase with a new FHA loan with as little as 3.5% down or conventional with 5% down.