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Refinance qualification concern

Posted on: 25th Sep, 2006 09:02 am
we recently sold our longtime primary home for a modest profit (paid off some debt, set a little $ aside) and have our vacation condo on the market currently. we are renting a \"corporate apartment\" month to month, hoping the condo sells soon, as that is where most of the money for the down payment on a new primary home will come from. the condo market is currently dead, though our place has appreciated considerably in the 12 years we have had it; thus, good equity. i have figured out that refinancing the condo, with cash out, could allow us to get funds for a decent down payment on our new primary home, while keeping the condo payment reasonable. my question is this; when calculating how much of a refinanced mortgage we would qualify for, will they include the rent we are currently paying for the corporate apartment? (no lease.) our plan is this; pull the condo (temporarily at least) off the market, refinance the condo, find a new primary home asap, vacating the apartment. i just want to know if what we pay in apartment rent will adversely affect the refinance. thanks.
Hi Dixie,

While calculating the refinance amount the rent amount will not be considered.

G.Brolsma
Posted on: 25th Sep, 2006 09:55 am
Hi,

I also agree that there will not be any consideration of your rent payment towards the refinance of your condo, also that your condo has good equity refinance will be much easier.
Posted on: 25th Sep, 2006 05:19 pm
While determining the loan amount for refinance, the lender may consider your rent payments as your expense. He may use it to calculate your debt to income ratio (ratio of total debt to gross monthly income) to reveal if at all you can qualify for the loan. This way the rent payments can affect the refinance.
Posted on: 26th Sep, 2006 02:24 am
Ok, now I am really confused! The above answers directly contradict each other. We will be living in, and paying (fairly substantial) rent on a month to month basis, for a temporary apartment until the condo (vacation home) refinance and cash out is complete and we have the $ in hand for a decent down payment on a primary home. If that temporary apartment rent is figured in the debt/income ratio, we wouldn't qualify for nearly as much as we would if it were not. What am I to believe?
Posted on: 26th Sep, 2006 12:39 pm
Yes, thank you - that answers precisely what I was concerned about. I will have to calculate that ratio and see where we stand with the current rent included.

I appreciate the clarification.

Marie (dixieagle)
Posted on: 26th Sep, 2006 02:55 pm
Hi Marie,

In addition to what James has mentioned about the DTI ratio calculation, there is one point which will factor into whether the rent is considered at the time of debt to income ratio calculation. If the rent is a recurring debt then it will be considered in the DTI ratio calculation.

A recurring debt is which extends for up to ten months. So if your stay in the rented property has been for the last ten months then at the time of calculating the DTI ratio you will have to add that amount also.


Thanks
Colin
Posted on: 26th Sep, 2006 04:49 pm
"A recurring debt is which extends for up to ten months. So if your stay in the rented property has been for the last ten months then at the time of calculating the DTI ratio you will have to add that amount also.
"

Hallelujah! We have only been in the apartment for two months now, and at the time of refinance will have been in only four months. Thanks, Colin!

Marie (dixieagle)
Posted on: 26th Sep, 2006 05:19 pm
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