Will Loan Officers See Paid Off Properties?

Question

I have a house paid free and clear and I'm thinking about buying a smaller house to live in with a loan and rent out my big house. Does anyone know if I will get questioned as to why I'm buying a smaller home?

Will they try to charge me a higher interest rate because they might think it's a rental?

Bruce L. · Answer

Thanks guys.

Kyle J. · Answer

It depends on the lender/underwriter in regards to what they'll want from you, but you shouldn't have any problem still getting an OO rate.  You'll have to sign a form stating that you intend to personally occupy the home.  Also, I've seen some lenders ask the potential borrow to write a letter explaining certain things (i.e. including why you want to buy a house).  So you MIGHT have to do something like that, but again it's going to depend on the underwriter.

Paul Cordero · Answer

Usually your other addresses/properties will come up on a search during underwriting for which you will have to prove that you own the home free and clear, plus they will want to know your intention with the new home.  If you are saying that you are downsizing, then you could purchase the new home as your new primary residence or as a 2nd home and then rent out your current primary residence without any risk to the lender.