Rental income from conventional loan used for FHA loan less than 100 miles away
Hello, I wanted to know if there was anyway around the FHA 100mile rule when it comes to using my rental property from the house I am saying at now to the house I want to get into with a FHA loan. The new house is a new build with great concessions the whole 6%. however I don't want to sell my current home and rent it out. I already have a co worker who wants to rent it out everything is lined up however because it not 100 miles away will I have problems with getting the mortgage approved, or is it possible to get an exception to the 100 mile rule because I had twins and want to move into a 4 bedroom from a 3 bedroom. Does this exception also let me use the rent from the conventional loan?
Yes, you can! It sounds like you may meet the first requirement-being able to show that your current living arrangements no longer work for your family. My borrower that did this wrote a letter stating that when she originally purchased her 1000 square foot 2 bedroom townhouse, she was the only person living there. She also had twins and got married, and took in a parent and explained that they now need the home they were buying because it had 4 bedrooms and was 2500 square feet. She provided tax returns to show her increase in dependents.
Here's the big catch. Your current home needs to be at 75% loan to value or less. The lender will order an appraisal and you can pay down your loan to 75 if it hasn't appreciated enough in value.
There are other options, such as a conventional loan with 3% down or other down payment assistance programs (not all require you to be a first time homebuyer). If the builder is wanting you to use their in house lender and they don't have any of those products in their product line, you can negotiate to keep the closing cost credit because their lender can't perform. Some in house lenders only have vanilla 30 year fixed products and that doesn't work for everyone. I'm sure in this market, they would rather wheel and deal than lose the deal altogether.
Good luck!
@Linda Garcia thanks for replying. I wouldn't be able to do a conventional because my dti was to high 49% I believe. So if I am able to get the exception then I will be able to use the rental income from my conventional home (departing residence)? Because with out the offset my dti it to high to qualify.
You would only be able to offset the current payment if you used a conventional loan on the new home.
49% is a very common DTI where I do loans (in a VERY high cost area), so that typically shouldn't be a barrier. You would want to be sure your lender is inputting all of your assets to make the file stronger. Typically we only put in what is needed (underwriters like to scour and question, so the less there is to scour, the easier the conditions are on a borrower), but adding extra money into the mix can sometimes do the trick to overcome any objections the automated underwriting system is having. Pull out all those old 401ks from other companies that don't have much it it...they all add up. Some lenders have their own stricter guidelines as well, called overlays, so even though you might get an automated underwriting approval up to 52 (which I have before), their company won't do the loan.
The other thing you can do is pay off debts at closing (paying off beforehand can be a messy trail of paperwork-it's usually better to wait. I'm working on one that paid off so mich debt in the middle of the transaction that it has delayed our closing!!!). If you have 2000 in credit card debt that is making your ratios too high, see which debts you could realistically pay off and then they can be excluded from your DTI. Sometimes this can get your DTI down to a point that can change a no to a yes.
Obviously I don't know your whole situation and what other obstacles, if any, there could be. These are just small tricks that a lot of inexperienced people don't know, or have put in the effort to try, which is why it's always good to find us old timers who have been around the block a few times. Lol.
@Linda Garcia yes @Linda Garcia is totally correct! The DTI of 49% is very common. I am an investor and a agent in Arizona why don't we connect so I can get you in touch with my lender and we can figure out whats the best route for you.