Renting a current home and buying a 2nd residence

[Shaun R.]

General question... if a homeowner wanted to purchase another home as a personal residence and keep their current one as a rental, how does the mortgage approval process work for the second home? I assume since there is no renter yet, both mortgages have to fit into their DTI? What about the down payment for the second home? If it's known that they will live in the one with the new mortgage and rent the original home, do they need a larger down payment for the new home? Or can you get the same type of owner occupant financing as you would normally get?

Would it be better to move out of the current home and get a renter in place before trying to buy the second home?  

[Ramandeep Sidhu]

The mortgage approval process for purchasing a second home as a personal residence while keeping your current home as a rental property can be somewhat complex. Lenders will typically consider both mortgages when evaluating your debt-to-income ratio, and the down payment requirements for a second home may be higher than for a primary residence. However, if you intend to live in the new home as your primary residence and rent out your current home, you may be able to qualify for owner-occupant financing. It may also be easier to obtain financing if you have already moved out of your current home and have a renter in place. It is important to carefully consider your financial situation and work with a lender who has experience with this type of scenario to ensure that you are able to obtain the financing you need.