WANT TO BUY A NEW HOME BUT CAN’T SELL THE EXISTING ONE?? There are rules and it’s not as easy as it once was.
It’s harder than it was a few years ago.
I remember when a home buyer could close on a home purchase of a new or resale residence, rent the existing property and all the lender would request would be a signed lease showing that the existing home was rented.
WERE THOSE THE “GOOD OLD DAYS”??
For home owners who wished to buy up and rent their existing home it surely was.
For the real estate agent it surely was. I closed many new and resale home purchases for home buyers who rented their home and purchased a new one.
The lender had no interest in the rental property beyond crediting the home owner with 75% of the rent provided for in the lease as income to the owner.
NOT A WEEK GOES BY THAT I’M NOT CONTACTED BY A HOME OWNER WHO WANTS TO TAKE ADVANTAGE OF THE LOW PRICES TODAY TO BUY THEIR DREAM HOME. However, the new rules for buying a new home with an existing rental property have made that type of transaction very difficult.
IT CAN BE DONE, BUT THE NUMBERS HAVE TO WORK. I closed one last year for a past buyer. 12 years ago, I sold a nice home to a relocating family who decided it was time to take advantage of home prices today to “buy the big house” which would be their residence for many years to come.
However, they did NOT want to sell their existing home for today’s market value. They decided to rent it. This was possible because:
1. They had 50% equity in the existing home.
2. They had 20% cash down on their new purchase.
3. They had excellent credit scores.
4. They rented their existing home through a rental management company.
Over a few short years, those criteria for buying a new home and renting the old one have changed dramatically. For instance. . . .
THE BUYER MAY HAVE TO. . .
Qualify for BOTH mortgage payments.
Have a cushion of 6 months mortgage payments for BOTH homes.
Buyer must have at least 30% equity in the existing property.
There are other conditions and exemptions that may apply, however, once a relocating or local buyer learns of the above minimum requirements, they realize that they may not qualify.
I believe it helps for agents to be aware of these rules. My experience is that, when inquiring prospective home buyers are aware of the new rules, they will be better prepared to buy or rent.
Courtesy, Lenn Harley, Broker, Homefinders.com, 800-711-7988.