Buying second home, renting out the first

[John Lindley]

Hello,

My wife and I are looking to get a bigger house and we want to keep the house we are currently in and rent it out.  I've been reading the guides and forum, and talking to some people in the community.  I'm hoping to get some feedback on our financing and loan plans.  If I've missed something in one of the guides or forums, feel free to send me a link.

Home prices in our area have started to come down and we are targeting to try and purchase at the end of this year. Our current home has a LTV of 50% or better. We were thinking to apply for a HELOC now, this way we have this in place when we buy the new home so we can do any necessary repairs on this house and any unknown repairs on the new house. We thought this gave us more flexibility than the Home Equity Loan as we don't know how much to pull out.

We are thinking to purchase the second house with an FHA loan. We can find enough capital to pay for this without using the HELOC.

Are there any concerns or watch outs with this strategy? Could I have problems trying to get the FHA loan so quickly after getting a HELOC? Is there any challenges with getting a FHA loan if I already have another home? As the current home isn't a rental property yet, will that cause problems during the FHA application? Anything else I haven't thought of?

Thank you for your time and advice!