Mortgage for new primary - TBD rental income on existing primary?

[John White]

Hi all, 

I've been poking around the forums where there is a ton of great advice but I didn't see an exact answer to my situation. 

I currently live in Florida where we own a property that would appraise around $800k ($450k in equity in the house). In the next few months I will be relocating to Maryland and plan to i) rent my current FL home (will rent around $5k a month) and ii) buy a new home in MD around $1.25M. A couple of questions ...

First, I'd like to use a $250k HELOC on the FL property for the downpayment on the MD home and finance $1M via a conventional mortgage. Will conventional lenders have any issues with my use of HELOC funds for the downpayment? I have about $100k in cash reserves.

Second, what will the lender look for to determine rental income on the FL property if it is not yet rented? Is it even possible to do this without a lease in place?

Any other thoughts on this strategy would be greatly appreciated!

If relevant, I also own a cash flowing rental property in NYC worth $1.3 that has $750k in equity in it. The reason I am planning to use a HELOC on the FL property where I have less equity is it's still my primary, so lower interest rates.

Finally, my W2 job is around $350k a year. 

[Chris Mason]

Originally posted by @John White:

Hi all, 

I've been poking around the forums where there is a ton of great advice but I didn't see an exact answer to my situation. 

I currently live in Florida where we own a property that would appraise around $800k ($450k in equity in the house). In the next few months I will be relocating to Maryland and plan to i) rent my current FL home (will rent around $5k a month) and ii) buy a new home in MD around $1.25M. A couple of questions ...

First, I'd like to use a $250k HELOC on the FL property for the downpayment on the MD home and finance $1M via a conventional mortgage. Will conventional lenders have any issues with my use of HELOC funds for the downpayment? I have about $100k in cash reserves.

Second, what will the lender look for to determine rental income on the FL property if it is not yet rented? Is it even possible to do this without a lease in place?

Any other thoughts on this strategy would be greatly appreciated!

If relevant, I also own a cash flowing rental property in NYC worth $1.3 that has $750k in equity in it. The reason I am planning to use a HELOC on the FL property where I have less equity is it's still my primary, so lower interest rates.

Finally, my W2 job is around $350k a year. 

A $1m loan on a $1.25m owner occupied SFR will be a "jumbo" loan. Fannie Mae and Freddie Mac guidelines will not apply.

Each individual lender will have their own different guidelines & requirements for "departing primary residence" rental income.

Hint hint: the ones with the most liberal Fannie-like guidelines will not have the best rates, and the ones with the best rates will require two years of rental income on tax returns to "count" that rental income.

I'd suggest an independent mortgage broker in Maryland, who will collect all your docs, and shop both the scenario and interest rate pricing among the marketplace to find the right home for the get-you-in-the-door purchase loan. Once you have that rental income on two years of tax returns, you will be refinancing to one of the more conservative jumbo loan programs.

Note, again, Freddie Mac and Fannie Mae guidelines are irrelevant here. This will be a non-conforming loan.