Renting out 1st first home; how to get mortgage for second?

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goblue102
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Renting out 1st first home; how to get mortgage for second?

Post by goblue102 » Sat Dec 01, 2018 5:56 pm

1st post, but I’ve really enjoyed reading the forums for a while.

Our family is looking to relocate from SF Bay Area to Durham NC. We own our home in CA, and would like to rent it out, instead of selling**. Mortgage is $1700/month, and rent should be about $4700/mo. So, we should safely cover expenses there.

The mortgage for the next home will have to be an 80/10/10, because we don’t have 20% liquid. We are otherwise well qualified ($280k in annual income, ~400k+ in retirement funds, 0 debt of any kind, other than aforementioned mortgage). The question is: will we struggle to get approved because the CA home looks like a $1700 / month burden, even though it will likely be neutral or positive in the medium and longer term? Is there anything I should bring to the mortgage conversation? Do they care about comparable rental values?. We do not have a lease in place yet because we still live there, but we’re confident it will rent.

Thanks for any advice you have!


**we considered both, but decided to rent it. We understand the issues with distant landlords, with tax implications of selling a rental, etc. But we have personal reasons to hold it, beyond financial, so that’s what we’re doing. Could be a mistake, but not the one I’m asking about here.

niceguy7376
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Re: Renting out 1st first home; how to get mortgage for second?

Post by niceguy7376 » Sat Dec 01, 2018 6:04 pm

Are you planning on buying before you rent out? Or are you moving to NC, rent CA home and then start looking in NC to buy a home.

Normally, lenders ask for rental agreement to even consider the rent that you receive.

Considering your income, what would be your debt to income ratio if you consider both mortgages but not the rental income? that might have more sway in getting good rates as well

pindevil
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Re: Renting out 1st first home; how to get mortgage for second?

Post by pindevil » Sat Dec 01, 2018 6:18 pm

What will be your overall debt with house you plan to buy? If you plan to take on a large amount of debt with new home purchase you are better off having a lease agreement with the old house beforehand.

Good luck! We had a similar situation years ago and renting has worked out very well.

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goblue102
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Re: Renting out 1st first home; how to get mortgage for second?

Post by goblue102 » Sat Dec 01, 2018 6:35 pm

niceguy7376 wrote:
Sat Dec 01, 2018 6:04 pm
Are you planning on buying before you rent out?

Essentially, yes. We want to be approved to buy before we get the rental situation finalized.


Considering your income, what would be your debt to income ratio if you consider both mortgages but not the rental income? that might have more sway in getting good rates as well

Good point. Before taxes (before income tax or property tax, is that how this is supposed to be calculated?) I estimate that we’d be at about 24% DTI with both of the mortgages and no rental income. Feels like a lot to us, but maybe not so bad.
Not to go off topic, but any other mortgage tips? We’re looking to finance 90% of a ~$710k house (10% down).

OpattyD
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Re: Renting out 1st first home; how to get mortgage for second?

Post by OpattyD » Sat Dec 01, 2018 6:47 pm

My lender required a copy of the lease and proof of the rent being paid by my tenant. I really think all they would need is a copy of the lease and proof of security deposit.

stan1
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Re: Renting out 1st first home; how to get mortgage for second?

Post by stan1 » Sat Dec 01, 2018 7:52 pm

Your lender may require that you have entered into a one year lease on the rental house as a condition of funding the new mortgage. Or not. These situations can vary by lender, location, and what side of the bed someone got out of in the morning. You have to discuss with your lender, but be careful that the underwriter can come in right before closing with more demands so make sure you specifically ask the lender what the underwriter requirements are.

techland
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Re: Renting out 1st first home; how to get mortgage for second?

Post by techland » Sat Dec 01, 2018 11:56 pm

I cannot speak for every lender/underwriter, but I did go through a similar experience to you.

In my case they wanted more than just rental agreements. The requirement was that any debt obligation regarding rental property had to have solid rental history for them to discount that monthly mortgage cost. I think they wanted at least 2-3 years. The lenders want some history to go by, so they can gauge the risk of vacancy, how fast you can get it rented out if there is vacancy etc...

I had to provide them with records of rental income getting paid over that entire period of time. Another reason to keep good records if you are in the rental business!

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Re: Renting out 1st first home; how to get mortgage for second?

Post by sunny_socal » Sun Dec 02, 2018 7:30 am

We just did something similar, left CA and rented out our home. Got an 80/10/10 mortgage here in TX.

For us it didn't work out until we had the rental agreement in place. Lender also wanted to see proof that it was "executed", ie. we had to produce a bank statement showing the deposit from the tenants. We found an apartment with a 3-month lease to enable our move prior to renting the 1st home.

It was a giant pain but here was the sequence:
1. Put existing home on rental market
2. No one was interested while we were packing up our stuff (imagine that :| )
3. Moved out
4. Replaced carpets and painted interior immediately after moving (arranged prior to move but later handled by property manager)
5. Moved into rental apartment (corporate housing followed by our own unit)
6. Took about a month to find a decent tenant (property manager)
7. THEN closed on mortgage in new state

If you make offers before everything settles, be sure to include a contingency for yourself in the new home deal: must rent out CA home first! We did not do this and wound up in hot water. In the end we were successful but our first home deal fell through:
(happy ending but only after a huge life lesson)
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Re: Renting out 1st first home; how to get mortgage for second?

Post by RickBoglehead » Sun Dec 02, 2018 7:51 am

Both mortgages will be included in determining whether you qualify. 36% debt to income. Your plan to rent is not of interest to the lenders. A signed one year lease with deposits and first month paid might be.

$280k /12 * .36 = $8,400.

Debt includes all loans, property taxes (both locations), mortgage insurance (10% down requires it),
HOA fees...

You should be able to plug everything and see whether it is feasible or not.

https://www.bankrate.com/calculators/mo ... lator.aspx

Note that if you buy a 2nd home and move, and your first home is vacant, your insurance company may have conditions for you to meet or they'll drop coverage.

Also note that you can get a HELOC on the first house while it's owner-occupied. Once you move out, you may find that more difficult. That COULD allow you to put 20% down and avoid PMI. That assumes you qualify for 2 mortgages once you do the math.
Last edited by RickBoglehead on Sun Dec 02, 2018 9:11 am, edited 1 time in total.
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Re: Renting out 1st first home; how to get mortgage for second?

Post by Auream » Sun Dec 02, 2018 8:38 am

You are probably over thinking this. With that income and DTI, assuming excellent credit, you should have no trouble qualifying for a mortgage at the best rates even without counting any of the (potential) rental income.

Trying to make an offer contingent on renting out your old house will never fly in this market either, the seller will just go on to the next buyer. I live in the Triangle and the market has softened just a bit over the past few months, but it’s still pretty hot and multiple offers on good houses is still a thing.

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Re: Renting out 1st first home; how to get mortgage for second?

Post by Bacchus01 » Sun Dec 02, 2018 9:10 am

What is your current mortgage holder going to think about you renting out your personal residence? Is that allowed in your mortgage? If not, you risk getting it called.

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Re: Renting out 1st first home; how to get mortgage for second?

Post by Carefreeap » Sun Dec 02, 2018 12:28 pm

Bacchus01 wrote:
Sun Dec 02, 2018 9:10 am
What is your current mortgage holder going to think about you renting out your personal residence? Is that allowed in your mortgage? If not, you risk getting it called.
They don't care so long as you had the intent to move in at the time of purchase. Given the loan to value I'm guessing the OP has owner occupied the property for several years.

OP I've done what you have proposed. I think you're smart to keep the property if you think you will return to CA. Too often our friends have regretted moving from the Bay Area and have been unable to afford to move back.

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Re: Renting out 1st first home; how to get mortgage for second?

Post by Bacchus01 » Mon Dec 03, 2018 8:01 am

Carefreeap wrote:
Sun Dec 02, 2018 12:28 pm
Bacchus01 wrote:
Sun Dec 02, 2018 9:10 am
What is your current mortgage holder going to think about you renting out your personal residence? Is that allowed in your mortgage? If not, you risk getting it called.
They don't care so long as you had the intent to move in at the time of purchase. Given the loan to value I'm guessing the OP has owner occupied the property for several years.

OP I've done what you have proposed. I think you're smart to keep the property if you think you will return to CA. Too often our friends have regretted moving from the Bay Area and have been unable to afford to move back.
I can tell you from experience that is absolutely not true. Their underwritten asset just changed its risk profile significantly.

katrid11
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Re: Renting out 1st first home; how to get mortgage for second?

Post by katrid11 » Mon Dec 03, 2018 9:34 am

For us, we had to qualify through underwriting to carry both houses. The banks did not care about the rent - as the loan officer put it "what if the renter stops paying rent? We need to you be able to cover both properties".

With your income you should qualify easily for both BUT don't overbuy in the new location. Apply for a typical single family home mortgage. The 80/10/10 should eliminate the need for PMI but the 10% second mortgage will count against your 36% debt ratio.

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Re: Renting out 1st first home; how to get mortgage for second?

Post by Sandtrap » Mon Dec 03, 2018 9:38 am

Loan companies will also look at your ability to pay the existing mortgage "without rent", as well as qualify and pay for the new mortgage.
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Re: Renting out 1st first home; how to get mortgage for second?

Post by JGoneRiding » Mon Dec 03, 2018 5:11 pm

I did this with no issue what so ever 3 years ago. We simply did a 90% loan and paid pmi and then refied 18 mos later. I very intentionally wanted the rental had been the long term plan.

I had no real complications . I needed the signed lease in place. I had the advantage of other rental income from other properties so the underwriter considered me established. I believe but was never actually told that this gave me greater lee way on the debt to income ratios which were the largest hurdle to clear.

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Re: Renting out 1st first home; how to get mortgage for second?

Post by JGoneRiding » Mon Dec 03, 2018 5:14 pm

goblue102 wrote:
Sat Dec 01, 2018 6:35 pm
niceguy7376 wrote:
Sat Dec 01, 2018 6:04 pm
Are you planning on buying before you rent out?

Essentially, yes. We want to be approved to buy before we get the rental situation finalized.


Considering your income, what would be your debt to income ratio if you consider both mortgages but not the rental income? that might have more sway in getting good rates as well

Good point. Before taxes (before income tax or property tax, is that how this is supposed to be calculated?) I estimate that we’d be at about 24% DTI with both of the mortgages and no rental income. Feels like a lot to us, but maybe not so bad.
Not to go off topic, but any other mortgage tips? We’re looking to finance 90% of a ~$710k house (10% down).
At only 24% dti I wouldn't even be worried! I was more closer to 40% (because they discount rental income) and I had student loans

WhyNotUs
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Re: Renting out 1st first home; how to get mortgage for second?

Post by WhyNotUs » Mon Dec 03, 2018 5:19 pm

What is the home in CA worth? Debt to equity? How much is TX home?
Might be able to do a cash out refinance on the CA home and pay cash. Could you qualify for that loan?
Debt on a rental can have some benefits.
Don't lie to lender about what you are doing though, be straight.
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Re: Renting out 1st first home; how to get mortgage for second?

Post by bloom2708 » Mon Dec 03, 2018 5:20 pm

Triple check and make sure you want to be a cross country small business owner.

How will you handle maintenance and repair issues? Are you going to pay a management company to manage it?

Your $3,000 clearing will be diluted by property taxes, income taxes, repairs/maint and vacancies. My sister had a rental. Renter got in,never made a single payment and managed to stay for almost a year. No rent recovered and they pretty much wrecked the house, paint, carpet. It can happen.

Start fresh. Sell, pocket the cash money. Start off on the right foot in NC. Value your time and your resources.

Just another perspective.
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Re: Renting out 1st first home; how to get mortgage for second?

Post by JGoneRiding » Mon Dec 03, 2018 5:22 pm

Bacchus01 wrote:
Mon Dec 03, 2018 8:01 am
Carefreeap wrote:
Sun Dec 02, 2018 12:28 pm
Bacchus01 wrote:
Sun Dec 02, 2018 9:10 am
What is your current mortgage holder going to think about you renting out your personal residence? Is that allowed in your mortgage? If not, you risk getting it called.
They don't care so long as you had the intent to move in at the time of purchase. Given the loan to value I'm guessing the OP has owner occupied the property for several years.

OP I've done what you have proposed. I think you're smart to keep the property if you think you will return to CA. Too often our friends have regretted moving from the Bay Area and have been unable to afford to move back.
I can tell you from experience that is absolutely not true. Their underwritten asset just changed its risk profile significantly.
I live in wa state not Ca but from experience they tend to have similar laws on these things. There is no way you could call a mortgage in my state after 1 year of occupancy. Based on what the OP wrote I agree with the higher up poster they have lived there for a while. As long as they didn't just refi 2 months ago they have no worries on that regard.

Now taking out a heloc and promptly moving could be a different story!

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Re: Renting out 1st first home; how to get mortgage for second?

Post by srt7 » Mon Dec 03, 2018 5:49 pm

Bacchus01 wrote:
Sun Dec 02, 2018 9:10 am
What is your current mortgage holder going to think about you renting out your personal residence? Is that allowed in your mortgage? If not, you risk getting it called.
As long as it was used as a primary residence for at least 6 months (1 year to be safe) no lender cares about it. They just want to see the payments roll in on time.
I can't think of anything more luxurious than owning my time. - remomnyc

srt7
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Re: Renting out 1st first home; how to get mortgage for second?

Post by srt7 » Mon Dec 03, 2018 5:51 pm

Bacchus01 wrote:
Mon Dec 03, 2018 8:01 am
Carefreeap wrote:
Sun Dec 02, 2018 12:28 pm
Bacchus01 wrote:
Sun Dec 02, 2018 9:10 am
What is your current mortgage holder going to think about you renting out your personal residence? Is that allowed in your mortgage? If not, you risk getting it called.
They don't care so long as you had the intent to move in at the time of purchase. Given the loan to value I'm guessing the OP has owner occupied the property for several years.

OP I've done what you have proposed. I think you're smart to keep the property if you think you will return to CA. Too often our friends have regretted moving from the Bay Area and have been unable to afford to move back.
I can tell you from experience that is absolutely not true. Their underwritten asset just changed its risk profile significantly.
And I can tell you from my experience that it is true. Think about it ... if the lender was so inclined to bug you about it then wouldn't you just refinance and take your mortgage business elsewhere?
I can't think of anything more luxurious than owning my time. - remomnyc

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Re: Renting out 1st first home; how to get mortgage for second?

Post by srt7 » Mon Dec 03, 2018 5:59 pm

As someone mentioned above ... never lie and be straight about your plan. There are thousands of lenders. If one is giving you a hard time about it then move on to the next one.

Although not the CA/NC combination, I did just this a few months ago and it worked out just fine. Lenders will offer up to 50% DTI (I recommend never going beyond 40% but again if there is a plan in play here then that's fine) and will only consider 75% of your EXECUTED rental lease/income.

I shopped a LOT for lenders and finally went with a Costco one.
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Re: Renting out 1st first home; how to get mortgage for second?

Post by srt7 » Mon Dec 03, 2018 5:59 pm

$710K home in Durham, NC ... must be a real nice one! :beer
I can't think of anything more luxurious than owning my time. - remomnyc

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Re: Renting out 1st first home; how to get mortgage for second?

Post by cherijoh » Mon Dec 03, 2018 6:09 pm

goblue102 wrote:
Sat Dec 01, 2018 6:35 pm
niceguy7376 wrote:
Sat Dec 01, 2018 6:04 pm
Are you planning on buying before you rent out?

Essentially, yes. We want to be approved to buy before we get the rental situation finalized.


Considering your income, what would be your debt to income ratio if you consider both mortgages but not the rental income? that might have more sway in getting good rates as well

Good point. Before taxes (before income tax or property tax, is that how this is supposed to be calculated?) I estimate that we’d be at about 24% DTI with both of the mortgages and no rental income. Feels like a lot to us, but maybe not so bad.
Not to go off topic, but any other mortgage tips? We’re looking to finance 90% of a ~$710k house (10% down).
If I'm not mistaken, the lender will be looking at the PITI (principal, interest, taxes, and insurance) on both properties combined. As others have noted, the intention to rent out your CA property is meaningless to a potential lender. The income (used in the denominator of debt to income ratio) should be gross monthly income.

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Re: Renting out 1st first home; how to get mortgage for second?

Post by pdavi21 » Mon Dec 03, 2018 6:21 pm

I can't see why you couldn't get one.
As others have said, it would help to have proof of established rent income.
If you cannot get one, just rent or buy a cheaper house until you can.

EDIT: Or sell the property (if you can get 4700/month, so can the person buying it).
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Re: Renting out 1st first home; how to get mortgage for second?

Post by Bacchus01 » Wed Dec 05, 2018 7:33 am

srt7 wrote:
Mon Dec 03, 2018 5:51 pm
Bacchus01 wrote:
Mon Dec 03, 2018 8:01 am
Carefreeap wrote:
Sun Dec 02, 2018 12:28 pm
Bacchus01 wrote:
Sun Dec 02, 2018 9:10 am
What is your current mortgage holder going to think about you renting out your personal residence? Is that allowed in your mortgage? If not, you risk getting it called.
They don't care so long as you had the intent to move in at the time of purchase. Given the loan to value I'm guessing the OP has owner occupied the property for several years.

OP I've done what you have proposed. I think you're smart to keep the property if you think you will return to CA. Too often our friends have regretted moving from the Bay Area and have been unable to afford to move back.
I can tell you from experience that is absolutely not true. Their underwritten asset just changed its risk profile significantly.
And I can tell you from my experience that it is true. Think about it ... if the lender was so inclined to bug you about it then wouldn't you just refinance and take your mortgage business elsewhere?
Yes. I’d their e underwriting guidelines changed, yes. Please call your mortgage lender and tell them you no longer live on the house and you are renting out the asset they have a huge stake in. Good for you if they don’t do anything. But they CAN, and that was my argument. You assume that risk.

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Re: Renting out 1st first home; how to get mortgage for second?

Post by Bacchus01 » Wed Dec 05, 2018 7:33 am

srt7 wrote:
Mon Dec 03, 2018 5:49 pm
Bacchus01 wrote:
Sun Dec 02, 2018 9:10 am
What is your current mortgage holder going to think about you renting out your personal residence? Is that allowed in your mortgage? If not, you risk getting it called.
As long as it was used as a primary residence for at least 6 months (1 year to be safe) no lender cares about it. They just want to see the payments roll in on time.
Not true.

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Re: Renting out 1st first home; how to get mortgage for second?

Post by AerialWombat » Wed Dec 05, 2018 8:02 am

What you are proposing to do is something I’ve now done four times in three years in three different states, on purpose. It’s the core of my rental property acquisition strategy.

First off, nearly all residential mortgage notes used in the US require you to have lived in the property for one year or longer before converting it to a rental. Based on the discussion, it sounds like you’ve been in the CA house longer than this, so not an issue. There is no requirement in modern conforming mortgage notes to tell your mortgage lender about the change in usage. What changes is your insurance risk profile, not the mortgage. Thus, you must change your insurance policy to a rental property policy.

Second, if your income is high enough to carry both mortgages and still be below the underwriting debt to income ratio, then it doesn’t matter if the CA house is rented or not. For FHA, Fannie/Freddie loans, DTI can go as high as 50% under current guidelines. Your lender can use lower numbers, but that’s the current federal allowable limit.

Third, conforming underwriting guidelines allow up to 75% of the rent on a signed lease to be credited towards your income for qualification purposes, even if the lease is brand new. There is no “seasoning” requirement on the lease. Again, the individual lender can add their own requirement (called an overlay), but this is the Fannie/Freddie rule. I’ve done this twice in the past two years.

Bottom line is that you’ll be fine. At your income level, assuming no other debt and excellent FICO scores, you’ll qualify for the second jumbo conforming loan even without a tenant in the old house. There is no change to your old mortgage, just an insurance policy change. And you don’t need rental income showing on tax returns yet to use the 75% rule, just a newly executed lease is fine for most lenders.
Last edited by AerialWombat on Wed Dec 05, 2018 8:30 am, edited 1 time in total.
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Re: Renting out 1st first home; how to get mortgage for second?

Post by Jack FFR1846 » Wed Dec 05, 2018 8:11 am

What does your mortgage note say about turning the house into a rental? When I rented my house while going away for grad school, mine said that I must immediately notify the lender. At that point, the lender had the options to leave the loan as is, call the note or require a new rental property mortgage be applied for.

Insurance goes without saying. If you forgo that, you might as well just cancel because if you have a claim and the company finds that the house is not owner occupied, they'll likely cancel flat (return premiums) and pay nothing on any claim.
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Re: Renting out 1st first home; how to get mortgage for second?

Post by leeks » Wed Dec 05, 2018 8:34 am

Unless one of you has lived in Durham before, rent for the first 6-12 months so you are sure of neighborhood before buying. That will also make it easier as the old house will be rented, and you can show income from that if necessary before you need a new mortgage.

Get to know your new city before committing to a home. Pay more in rent as needed to try out a neighborhood, any rental premium is far less than transaction costs of selling a place if you don't love it after actually living there. You can't know from another state how you will feel about a neighborhood (including commute and social/recreational options and schools) and some neighborhoods in Durham are changing rapidly so online info can be outdated and cannot capture block-by-block differences. Look into transit expansion plans to take into consideration when choosing a neighborhood to try out.

I recommend renting first anywhere but have an anecdote from Durham specifically. I have two close friends who bought in the same neighborhood there at about the same time. 5+ years later, one family is satisfied but the other wishes they had delayed purchasing. They thought they bought close enough to downtown but find in practice it is actually too far to regularly walk with their kids and the bus service is not as convenient as expected. They find their neighbors stuffy and boring and the friends they have made don't live close by. They have to drive more than they would like, in part because they drive their kids to a public school outside their zone (and had to jump through hoops to enroll there) as the local school was not the right fit despite advance research looking positive. They now know another area they would much prefer but feel the transaction costs of moving would be too much of a financial setback.

Durham is one place I would strongly consider if/when we are ready to relocate from NYC. Good luck!

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Re: Renting out 1st first home; how to get mortgage for second?

Post by srt7 » Sun Dec 09, 2018 8:52 pm

Bacchus01 wrote:
Wed Dec 05, 2018 7:33 am
srt7 wrote:
Mon Dec 03, 2018 5:49 pm
Bacchus01 wrote:
Sun Dec 02, 2018 9:10 am
What is your current mortgage holder going to think about you renting out your personal residence? Is that allowed in your mortgage? If not, you risk getting it called.
As long as it was used as a primary residence for at least 6 months (1 year to be safe) no lender cares about it. They just want to see the payments roll in on time.
Not true.
Oh how am I going to refute that brilliant argument :mrgreen:

Anyway, are you basing this on your personal experience or is this just an opinion?
I can't think of anything more luxurious than owning my time. - remomnyc

srt7
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Re: Renting out 1st first home; how to get mortgage for second?

Post by srt7 » Sun Dec 09, 2018 8:57 pm

Bacchus01 wrote:
Wed Dec 05, 2018 7:33 am
srt7 wrote:
Mon Dec 03, 2018 5:51 pm
Bacchus01 wrote:
Mon Dec 03, 2018 8:01 am
Carefreeap wrote:
Sun Dec 02, 2018 12:28 pm
Bacchus01 wrote:
Sun Dec 02, 2018 9:10 am
What is your current mortgage holder going to think about you renting out your personal residence? Is that allowed in your mortgage? If not, you risk getting it called.
They don't care so long as you had the intent to move in at the time of purchase. Given the loan to value I'm guessing the OP has owner occupied the property for several years.

OP I've done what you have proposed. I think you're smart to keep the property if you think you will return to CA. Too often our friends have regretted moving from the Bay Area and have been unable to afford to move back.
I can tell you from experience that is absolutely not true. Their underwritten asset just changed its risk profile significantly.
And I can tell you from my experience that it is true. Think about it ... if the lender was so inclined to bug you about it then wouldn't you just refinance and take your mortgage business elsewhere?
Yes. I’d their e underwriting guidelines changed, yes. Please call your mortgage lender and tell them you no longer live on the house and you are renting out the asset they have a huge stake in. Good for you if they don’t do anything. But they CAN, and that was my argument. You assume that risk.
Why would I contact them? I signed up for a 30 year mortgage but never guaranteed that I will live in that house for 30 years (no one can give such a guarantee). It's a business transaction and there are risks taken on both sides.
I can't think of anything more luxurious than owning my time. - remomnyc

Nappyloxs
Posts: 7
Joined: Tue Feb 28, 2017 1:06 am

Re: Renting out 1st first home; how to get mortgage for second?

Post by Nappyloxs » Sun Dec 09, 2018 9:30 pm

I rented out my first house last year. I did a cashout refi a year before, because I knew we were moving in the near future and wanted the 20% down.

Why do you want to rent out the house and be a landlord? You will be moving across country.

My house was in good shape and I had great tenants paying probably above market rate my first year. However, something went wrong every few months. Luckily nothing major, but still had had to go over there every once in awhile. Property managers will charge 10-20%.

My first tenants moved this year and I got a good second tenant, but at decreased rate (at market rate). However, we have a ton of equity in the house and will come up on the 2/5 rule soon. So we are contemplating selling and taking the lump sum rather than monthly profits for tax reasons. I mention this because it sounds like you might have plenty of equity in your place too. You could sell it, have 20%, and buy rental properties in your new town.

Bacchus01
Posts: 3182
Joined: Mon Dec 24, 2012 9:35 pm

Re: Renting out 1st first home; how to get mortgage for second?

Post by Bacchus01 » Sun Dec 09, 2018 9:36 pm

srt7 wrote:
Sun Dec 09, 2018 8:57 pm
Bacchus01 wrote:
Wed Dec 05, 2018 7:33 am
srt7 wrote:
Mon Dec 03, 2018 5:51 pm
Bacchus01 wrote:
Mon Dec 03, 2018 8:01 am
Carefreeap wrote:
Sun Dec 02, 2018 12:28 pm


They don't care so long as you had the intent to move in at the time of purchase. Given the loan to value I'm guessing the OP has owner occupied the property for several years.

OP I've done what you have proposed. I think you're smart to keep the property if you think you will return to CA. Too often our friends have regretted moving from the Bay Area and have been unable to afford to move back.
I can tell you from experience that is absolutely not true. Their underwritten asset just changed its risk profile significantly.
And I can tell you from my experience that it is true. Think about it ... if the lender was so inclined to bug you about it then wouldn't you just refinance and take your mortgage business elsewhere?
Yes. I’d their e underwriting guidelines changed, yes. Please call your mortgage lender and tell them you no longer live on the house and you are renting out the asset they have a huge stake in. Good for you if they don’t do anything. But they CAN, and that was my argument. You assume that risk.
Why would I contact them? I signed up for a 30 year mortgage but never guaranteed that I will live in that house for 30 years (no one can give such a guarantee). It's a business transaction and there are risks taken on both sides.
You likely signed a document that clearly states you are taking out a loan for your primary residence. If it is no longer your primary residence and is instead now a piece of rental property, you may be violating your agreement. Not contacting them and claiming ignorance does not protect you from possible fraud. If they find out, and they may just find out, their recourse is likely to just call the loan. That’s your risk.

Carefreeap
Posts: 2652
Joined: Tue Jan 13, 2015 7:36 pm
Location: SF Bay Area

Re: Renting out 1st first home; how to get mortgage for second?

Post by Carefreeap » Sun Dec 09, 2018 9:37 pm

Bacchus01 wrote:
Mon Dec 03, 2018 8:01 am
Carefreeap wrote:
Sun Dec 02, 2018 12:28 pm
Bacchus01 wrote:
Sun Dec 02, 2018 9:10 am
What is your current mortgage holder going to think about you renting out your personal residence? Is that allowed in your mortgage? If not, you risk getting it called.
They don't care so long as you had the intent to move in at the time of purchase. Given the loan to value I'm guessing the OP has owner occupied the property for several years.

OP I've done what you have proposed. I think you're smart to keep the property if you think you will return to CA. Too often our friends have regretted moving from the Bay Area and have been unable to afford to move back.
I can tell you from experience that is absolutely not true. Their underwritten asset just changed its risk profile significantly.
To what experience are you referring? I've rented out my primary homes 3x. My lenders certainly knew I had moved because my addresses changed to out of state/out of the country.

While I agree the risk profile changes due to its non O-O status it would seem to be mitigated by the lower LTV from when the mortgage was originated.

Bacchus01
Posts: 3182
Joined: Mon Dec 24, 2012 9:35 pm

Re: Renting out 1st first home; how to get mortgage for second?

Post by Bacchus01 » Sun Dec 09, 2018 9:38 pm

srt7 wrote:
Sun Dec 09, 2018 8:52 pm
Bacchus01 wrote:
Wed Dec 05, 2018 7:33 am
srt7 wrote:
Mon Dec 03, 2018 5:49 pm
Bacchus01 wrote:
Sun Dec 02, 2018 9:10 am
What is your current mortgage holder going to think about you renting out your personal residence? Is that allowed in your mortgage? If not, you risk getting it called.
As long as it was used as a primary residence for at least 6 months (1 year to be safe) no lender cares about it. They just want to see the payments roll in on time.
Not true.
Oh how am I going to refute that brilliant argument :mrgreen:

Anyway, are you basing this on your personal experience or is this just an opinion?
Personal experience on more than one occasion as well as talking to several in the industry. Many times, as long as you have sufficient credit and are paying on time, they won’t care. But it IS their right to call your loan.

JGoneRiding
Posts: 1836
Joined: Tue Jul 15, 2014 3:26 pm

Re: Renting out 1st first home; how to get mortgage for second?

Post by JGoneRiding » Sun Dec 09, 2018 10:12 pm

srt7 wrote:
Sun Dec 09, 2018 8:57 pm
Bacchus01 wrote:
Wed Dec 05, 2018 7:33 am
srt7 wrote:
Mon Dec 03, 2018 5:51 pm
Bacchus01 wrote:
Mon Dec 03, 2018 8:01 am
Carefreeap wrote:
Sun Dec 02, 2018 12:28 pm


They don't care so long as you had the intent to move in at the time of purchase. Given the loan to value I'm guessing the OP has owner occupied the property for several years.

OP I've done what you have proposed. I think you're smart to keep the property if you think you will return to CA. Too often our friends have regretted moving from the Bay Area and have been unable to afford to move back.
I can tell you from experience that is absolutely not true. Their underwritten asset just changed its risk profile significantly.
And I can tell you from my experience that it is true. Think about it ... if the lender was so inclined to bug you about it then wouldn't you just refinance and take your mortgage business elsewhere?
Yes. I’d their e underwriting guidelines changed, yes. Please call your mortgage lender and tell them you no longer live on the house and you are renting out the asset they have a huge stake in. Good for you if they don’t do anything. But they CAN, and that was my argument. You assume that risk.
Why would I contact them? I signed up for a 30 year mortgage but never guaranteed that I will live in that house for 30 years (no one can give such a guarantee). It's a business transaction and there are risks taken on both sides.
I keep getting the feeling there are people on here that had boutique non conforming loans or are in same weird place with special underwriting.

I have read my loans all 20 plus pages on more that one occasion all my loans have been conforming. All say essentially the same thing. I must intend to occupy them for a min of one year. And that basically after that it doesn't matter I can do what I want as long as I maintain the property maintain insurance and pay the taxes. I know older loans and possibly pre crisis loans were different and there are speciality in house loans that can be weird of course but a fanny Freddie conforming loan will be similar across the board.

Carefreeap
Posts: 2652
Joined: Tue Jan 13, 2015 7:36 pm
Location: SF Bay Area

Re: Renting out 1st first home; how to get mortgage for second?

Post by Carefreeap » Sun Dec 09, 2018 11:22 pm

Bacchus01 wrote:
Sun Dec 09, 2018 9:38 pm
srt7 wrote:
Sun Dec 09, 2018 8:52 pm
Bacchus01 wrote:
Wed Dec 05, 2018 7:33 am
srt7 wrote:
Mon Dec 03, 2018 5:49 pm
Bacchus01 wrote:
Sun Dec 02, 2018 9:10 am
What is your current mortgage holder going to think about you renting out your personal residence? Is that allowed in your mortgage? If not, you risk getting it called.
As long as it was used as a primary residence for at least 6 months (1 year to be safe) no lender cares about it. They just want to see the payments roll in on time.
Not true.
Oh how am I going to refute that brilliant argument :mrgreen:

Anyway, are you basing this on your personal experience or is this just an opinion?
Personal experience on more than one occasion as well as talking to several in the industry. Many times, as long as you have sufficient credit and are paying on time, they won’t care. But it IS their right to call your loan.
You actually had a loan called because you moved out of the house and rented it? What year(s) did that happen?

mfng
Posts: 15
Joined: Sat Apr 29, 2017 9:06 pm

Re: Renting out 1st first home; how to get mortgage for second?

Post by mfng » Mon Dec 10, 2018 8:09 am

srt7 wrote:
Mon Dec 03, 2018 5:59 pm
$710K home in Durham, NC ... must be a real nice one! :beer
You would be surprised at housing prices in the Triangle (Durham, Raleigh, Chapel Hill)! Downtown Durham, in particular, has so much more demand than supply. That said I'm sure this is a beautiful home.

Topic Author
goblue102
Posts: 4
Joined: Mon Nov 19, 2018 9:53 pm

Re: Renting out 1st first home; how to get mortgage for second?

Post by goblue102 » Mon Dec 10, 2018 9:04 am

I really appreciate the comments, advice, and discussion. After some more digging, a few follow ups:

I have read my current mortgage carefully, and don’t se any red flags. It was a 20% down, conventional loan, and we’ve been here for years. I’ll obviously address insurance before making any changes.

We didn’t have any issue qualifying for a second mortgage without any consideration of rental income, so that makes that easy.

Yes, $700k+ is a lot of house. But, coming from CA we know it’s mostly just about the market, not as much about the house. We feel lucky that we can afford to consider a “hot” market, even if it’s not the bargain it may have been a few years ago.

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