Should I buy a new house & rent out my current one?
I have a growing family and would like to buy a bigger home. Since buying our current house, our income has more than doubled and have been pre-approved for a loan for a new house. I asked about possibly renting out our existing home. The mortgage guy told me in order to qualify, I would need to have 6 months of BOTH mortgage payments just "sitting" in an account somewhere. It could be in a retirement fund, 401k, etc... My real estate agent has never heard of this, and neither have I. Anyone else?
The house we want to build is in a neighborhood where there are only a few lots left, and they have come way down on their prices. On the other hand, the value of my home now has dropped dramatically. Right now, we could not sell our house without losing money. So we thought about renting it out until the home value come back up. I'd just like to have some advice from others on this. any advice or input would greatly appreciated.
- Anonymous1 decade agoBest Answer
This is correct and falls under the buy and bail guidelines.
You can see the guidelines here:Source(s): I'm a mortgage banker/broker
- 1 decade ago
The idea of renting out your property sounds great, but it is a lot of work. The owner of the property is basically responsible for constant maintenance. There are many laws regarding tenant/landlord obligations. Clearly you would be financially stable to purchase a new home without the revenue from the sale of your current home. You just need to ask yourself if it would be worth the extra stress to build a home, and then begin to rent out your old home. In my opinion, it may be beneficial 5 years from now, but it will take a lot of time and effort to get to that point.
Also, the market for those who want to rent a nice home (assuming your home is atleast $160,000+ range?) is fairly small. A typical group of renters would be a group of college students, which would have its downfalls with the possibility of parties, and disregard to your home. I'm not aware of whether or not your in a college city or not. Other renters would include a couple or an individual or two, who would possibly be willing to pay $750/month if they have decent jobs and an efficient use for the home. You would have to decide on a lease, whether it would be something like a set 6 month or 12 month lease; or if you would leave it open ended month by month.
All in all, If you have your current home nearly paid for, and you know that you do not want to sell your home for 75% of what you paid for it, then having the extra income from renting the house would be great. Take a look at your states landlord/tenant laws to see what your landlord obligations would be:
- dell_fargusLv 51 decade ago
I was in the same situation 2 years ago. Here's what we did:
We took out a home equity loan on our old house, and put it up for sale.
We then took the loan and used it as a down payment on our new place.
This was a bit risky, but we managed to sell the old place and cover the loan.
The drawbacks were that it took a year to sell the old house, so we were stuck with two mortgages, paying two sets of utility bills & taxes, mowing two lawns, etc. for that time.
Bear in mind that this was two years ago, before the banking system and the real estate market went into the sewer.
Renting the place out *might* be an option if you're handy (to do your own maintenance), or if the place is in good shape - and you get good tenants. You should do a lot of research first with local rental property laws and codes, local rent prices, and be extra picky with who you rent the place to. But, there is always the likeliness that you'll get a 2am phone call that the toilet's clogged, or the furnace quit.
- golferwhoworksLv 71 decade ago
yes this is true. You are not a seasoned land lord by any stretch of any ones thoughts. They will also want you to at least 30% equity in the home you want to rent.
See what has happened over the past 3 years is that people bought bigger homes and then foreclosed the old home and walked away from that obligation. That may not be you. It has happened so often that any lender will not allow this to happen again.
I would sell the one I have if the 2 conditions I set forth are not absolute for you. It will be a huge leap if the lender allows you to buy a new home and rent the old one with out at least 30% equity
I am a mortgage banker in TN
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- Anonymous1 decade ago
if you decide to rent it out, just make sure you educate yourself about all your landlord/tenant laws in your state.
- 1 decade ago
rent u will get money