We are still very new to REI and are still in pursuit of that elusive first deal. However, we are also in the market to upgrade our current living situation as we have pretty much outgrown the 3/2/2 that we are currently in. There are some 5/3/3 homes available in the area we want that we can make work within our current budget but I don't know about qualifying for the mortgage with our current mortgage. Does anyone have experience with this? What options might be available to us for this?
One option I THINK we may have is to sell our current house to our LLC. I think we could swing a 20% down payment from our LLC but I haven't actually applied for any mortgage financing with the LLC as of yet. Does anyone know of any good lender options that might provide us with a best shot at getting a mortgage for an investment property?
I know that people do this kind of thing all the time, I just don't know how. We really want to keep our current house as an investment property though. We don't want to just put it on the market if we can at all possibly avoid it. In fact, we would be more apt to simply stay put until we can come up with enough capital to overcome any debt to income issues that might be the primary problem.
Here are some rough numbers...
Current house retail ~$190k with a current mortgage payoff ~$165k and monthly payments about $1550 (tax and ins escrow included).
Target house listed $255k
I think I can use a VA loan on the new house and our credit scores currently are about 750. Our combined annual income is about $190k. This is where I'm not sure if we can qualify on the debt to income ratio?
Thank in advance for any thoughts, suggestions, or advice.
@Scott Nipp What are houses similar to yours renting for? With a mortgage payment that high the rent would have to be considerably higher for you guys to cashflow even a small amount. (I'm not familiar with the going rates in your area which is why I ask about comparable rentals) Also you would want to keep in mind that with a vacancy you guys could have to cover both mortgages for a few months.
Some lenders will count the rental income on your current house to help you qualify for a mortgage on a new place. You should be able to get a pre-qual letter, and then you'll need a signed lease and first month's rent deposited for the loan to actually close.
The timing gets tricky, but if you're in a strong rental market where you know your house will rent easily, you could put a contract on a new place, market your current house as available a week or two after the closing.
Of course, there's always the risk that you aren't able to close (or closing gets delayed), in which case you're stuck in some kind of interim housing situation until you can work that out.
I should also mention that I think a financing contingency would keep you safe against losing your earnest money in case you can't rent the place out (and thus can't qualify for a new mortgage), but I'm not 100% on that. And I am not a lawyer/this is not legal advice.
I'm actually looking to sell our current house with owner financing as opposed to renting it. Based on a simple website calculation from our combined income we should more than qualify for the second house mortgage without needing to sell our current home. I only hope that I'm not missing some key components here.
Any mortgage brokers out there that can shed some light on this?
I did something similar, with similar finances. Assuming that you don't have a huge pile of other debt, you will have no trouble getting a new place without any tricks.
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