Many borrowers would like to purchase a new primary residence without having to sell their present home first. Some hope to get a bargain on a new home and need to be able to act quickly, while others want to keep their present home to earn income as a rental property. Mark Wells of Preferred Financial Services addresses questions about how this can be worked out.
Am I allowed to own two primary residences at one time? Technically, you can only own one primary residence, so if you want to purchase a new home and retain your present home, you must declare your intentions for the new home. You must state and prove that you will move into the new home within 30 days of closing and declare it your primary residence.
How will the new lender know if I really moved in after they have closed my loan? Before you close your new loan, the lender will want to see a real estate listing contract showing you have at least put your current home on the market. If you plan to retain the home and rent it out, you may have to provide a signed lease agreement showing you already have a tenant. After your closing, the lender can check public records to make sure you have declared the new home a primary residence on the tax rolls. They also require a homeowner’s insurance binder on the new home, and the binder must indicate whether you currently reside in the house or if it is rental property.
Do I have to be able to carry both house payments to qualify for the new purchase? Yes, and that can often prevent a borrower from buying the new home.
Can I count the future rental income on the home I am leaving, and use that to qualify? Possibly, but extensive rules apply. To use rental income on the house you are leaving, you must do one of two things: Provide a rental appraisal that determines the fair market rent of your home, or provide a 12-month lease agreement with first month’s rent and security deposit to show the property has been rented.
Why don’t I just skip all this hassle and buy the new home as a second home? There is a precise definition of “second home” that all lenders use: it must be at least 100 miles away from your present primary residence, or it must be in a resort area (lake, mountains, beach, etc.).
Can I use the equity in my present home as down payment on the new home? If you qualify for both house payments, you are allowed to cash out the equity in your present home to use as down payment on the new home.
A mortgage broker can tell you if you qualify to buy a new primary residence while retaining your current residence. Mark is happy to do this or answer any mortgage-related questions. He can be reached via phone at 864-235-9596 or email at Mark@TheGreatestRates.com
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