Owner Occupied To Investment Home & Buying New Home

Owner Occupied To Investment Home & Buying New Home

This BLOG On Owner Occupied To Investment Home & Buying New Home Was UPDATED On March 19th, 2018

There are cases where a homeowner with an owner occupied home wants to purchase another owner occupied home. Then wants to sell their current owner occupied home after they move in to their new owner occupied home.

  • This can get done under certain circumstances
  • Homeowner needs to qualify for both mortgages
  • Borrowers needs to meet minimum debt to income ratio requirements
  • Cannot qualify for both mortgages if they exceed the maximum debt to income ratios
  • However, there are potential solutions
  • A homeowner with an owner occupied home can convert the owner occupied to investment home without refinancing
  • Homeowners can use 75% of the potential market gross rental income as borrowers income
  • There are rules and regulations concerning this
  • It depends whether the new owner occupied home purchase is a FHA or conventional loan

FHA Owner Occupied To Investment Home Guidelines

If a homeowner currently lives in a home and needs to convert their owner occupied to investment home to use potential income, the following applies:

  • If borrower of new home needs to use the potential rental income on exiting property in order to qualify, then the homeowner needs to have at least 25% equity in exiting property
  • The homeowner does not need to refinance their home
  • If the loan to value is higher than the 75% LTV required, homeowner can pay down their mortgage so it meets the 75% LTV
  • Needs to get an investment home appraisal with potential rental income
  • Whatever the appraiser comes up with as potential rental income, then 75% of the potential rental can be used as qualified income
  • This rental income is necessary for many folks in order to qualify for both mortgages
  • FHA does not require that the homeowner have a tenant with a signed lease
  • FHA only requires that the homeowner has 25% equity on the owner occupied home that will be converted to an investment home

Fannie Mae Owner Occupied To Investment Home Guidelines

If a homeowner currently lives in a home and needs to convert owner occupied to investment home they can use potential rental income as qualified income:

  • If homeowner needs to use potential rental income in order to meet the debt to income ratios under certain circumstances
  • Homeowner needs to have at least 25% equity in exiting owner occupied home
  • Under Fannie Mae Guidelines, a one year lease agreement is required on Conventional Loans
  • In order to use 75% of the potential rental income on conversion of the owner occupied to investment home
  • The homeowner also needs two months reserves on both converted exiting owner occupied to investment home
  • Also needed are two months reserves on new owner occupied home purchase
  • The new conventional mortgage loan program is much stricter than the FHA Home Loans

Home Buyers who need to qualify for mortgage with a direct lender with no mortgage overlays can contact us at The Gustan Cho Team at Loan Cabin Inc. at 262-716-8151 or email us at gcho@gustancho.com. Gustan Cho Associates Mortgage Group at Loan Cabin Inc. has no lender overlays on FHA, VA, USDA, and Conventional Loans. Loan Cabin Inc. is also correspondent lenders on non-qm loans and bank statement loans for self employed borrowers. We are available 7 days a week, evenings, weekends, and holidays.

Gustan Cho

www.gustancho.com

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