Need Advice on Primary Property

[Tomasz Strzemecki]

Looking to rent out my primary property in order to "free up" my credit for another investment.

By doing that, my goal is to buy another property with less $$$ down (3.5% FHA, 5% conventional, 10% conventional) as a primary property instead of buying an investment with 25% down.

Do the banks look favorably at a situation where you have 2 rental properties and no primary? Can that be done or is there a grace period that I will need to rent my old primary for before I can even apply for another primary loan?

Thoughts?

Thank you.

Tomasz S.

[Albert Bui]

Tomasz you're in luck.....

The factors in this are:

- what are your other sources of income, wages, and etc (trying to determine your debt to income?

- what are your other min monthly obligations?

- what is the PITIA (principal/interest/taxes/insurance/assessments) of this property you're trying to convert into a rental and what is the gross rental rate in this area?

- if you dont have 25% equity documented in the recently converted rental you will not be able to use gross rents X 75% - the PITIA of the property AKA ... you will have to qualify for the entire PITIA with your earned/ordinary/wages/etc

- If you move back to your parents or a rental/apartment then we'll need 6 months (grey area - my underwriters comfort zone) of rental receipt before we can use gross rent X 75% - PITIA with out evidence of 25% equity. So this is key if you do not have the equity to document you will want to want to keep good records of rental income receipts for 6+ months (perhaps separate bank accounts for rentals recommended).

*FHA is not for first time buyers only its for primary residences only. You can use FHA on your next purchase or conventional the advantage of FHA is that it gives you more leverage and can qualify to 55% DTI max while conventional will max usually at 43% come January 10th. FHA has a higher effective cost when factoring in the monthly mortgage insurance for the life of the loan versus the conventional equivalent, but conv requires 5% min down and is stricter on credit.

At the end of the day as long as the debt to income ratios work you can qualify for another primary but it has to be strategically planned. since you're risking your qualification and your capital you're going to want a lender who understands the underwriting process for non owner occupied scenarios with great depth.