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I have good credit (mid 700s) and a decent income ($145k). I would like to buy a new home but am upside down on my current home. I would like to rent out my current home and move into a larger home with my family. I've been told that I cannot buy a 2nd home if I dont have equity in my current home. I can afford both payments but was told that I couldnt use rental income to bolster my debt-to-income ratio.

Any thoughts on how I might buy this 2nd home?

smithsussane · Posted: Thu Nov 20, 2008 10:16 pm Post subject:

Hi pjearly!

Welcome to forums!

There are some lenders who include rental income in the DTI whereas some lenders don't. Lenders may also ask to provide them with the lease agreement that you had with the tenant or proof of 12 months payments received.

You can look for lenders who may include your rental income in the DTI. This community also has a number of lenders whom you may consult and seek a no obligation free mortgage consultation. You can check out the options they may offer you.

Feel free to ask if you have further queries.

Sussane

gmakerley · Posted: Fri Nov 21, 2008 9:39 am Post subject:

no, sussane - there are new rules that apply to rental income for marketable loan products. the only way you'll find a lender who would consider the rental income is if you find one who plans to portfolio the loan.

okay, pjearly...if you can afford both mortgage payments without the rental income considered, why is it that you're not getting anywhere? depending on the location of this property you wish to buy, you might want to have it considered as a second home rather than a primary residence. that's just a thought...otherwise, seek out better answers on why you can't get your loan without the need for rental income.

gmakerley · Posted: Fri Nov 21, 2008 9:40 am Post subject:

and, of course, as soon as i sent that one...this thought:

"afford" is your word. what is your lender(s) telling you? what is your overall debt ratio, according to the lender(s)? that's what will determine whether or not you get the loan you're seeking.

Guest

Yes, "afford" is my word. With rental income my debt/income ratio is around 40%. However, without it Im at about 55%. So the problem seems to stem from the fact that they wont consider the rental income. I'm told I need to get that ratio below 50% which means an extra $1000 a month in income I think.

Buying as a second property increases the down-payment requirement much higher. Any ideas?

Niicss · Posted: Sat Nov 22, 2008 2:26 am Post subject:

Hi

To pjearly!

Mortgage lenders can be tougher on second-home loan applications because they may feel; you may face problems in paying off the dues as you already have another mortgage. Thus, the second-home mortgage interest rates traditionally run around one and half point higher than those for first residences. If they do not charge higher interest rates, they may even charge a higher down-payment for giving the loan. However, I would like to say that this is not a rule but the lenders may think like this.

To gmakerley!

I agree with you. Even I have also heard that in the present times only the portfolio lenders are considering the rental income.

Thanks

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Buying a second property