Buying a new home as a primary residence, looking to rent out current home. Should I create an LLC or Trust?

[Michael Edwards]

Hi there everyone. 

I've been lurking around the forums for a few months picking up some stellar advice. I finally have a question of my own that I'd like some insight on.

My wife and I currently own a smaller 2/1 and just recently had a baby boy (our first). We are looking to purchase a larger home in the same area and rent out our current home as an investment property. We have compared our property to other rentals in the immediate area and could easily cash flow $200-300/month. However, after speaking with a mortgage broker we discovered our current approved amount is lower than expected due to the ownership of our current residence. If we didn't own our current home, we would be approved for over 30% more than we currently are.

Is there someway to highlight our current residence as a (potential) asset that could net additional income, rather than a knock against our approved mortgage amount? Would this be a scenario where creating an LLC or holding company would allow us to transfer our current home as a rental property to ourselves in order to be approved for a higher mortgage amount?

Anyone care to share some knowledge or personal experience in a similar scenario?