Mortgage for new primary - TBD rental income on existing primary?

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Mortgage for new primary - TBD rental income on existing primary?

John White
Member since 2019 · 3 posts · 2 votes

Hi all, 

I've been poking around the forums where there is a ton of great advice but I didn't see an exact answer to my situation. 

I currently live in Florida where we own a property that would appraise around $800k ($450k in equity in the house). In the next few months I will be relocating to Maryland and plan to i) rent my current FL home (will rent around $5k a month) and ii) buy a new home in MD around $1.25M. A couple of questions ...

First, I'd like to use a $250k HELOC on the FL property for the downpayment on the MD home and finance $1M via a conventional mortgage. Will conventional lenders have any issues with my use of HELOC funds for the downpayment? I have about $100k in cash reserves.

Second, what will the lender look for to determine rental income on the FL property if it is not yet rented? Is it even possible to do this without a lease in place?

Any other thoughts on this strategy would be greatly appreciated!

If relevant, I also own a cash flowing rental property in NYC worth $1.3 that has $750k in equity in it. The reason I am planning to use a HELOC on the FL property where I have less equity is it's still my primary, so lower interest rates.

Finally, my W2 job is around $350k a year. 

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Chris MasonPro Member
Moderator
Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
7y
Originally posted by @John White:

Hi all, 

I've been poking around the forums where there is a ton of great advice but I didn't see an exact answer to my situation. 

I currently live in Florida where we own a property that would appraise around $800k ($450k in equity in the house). In the next few months I will be relocating to Maryland and plan to i) rent my current FL home (will rent around $5k a month) and ii) buy a new home in MD around $1.25M. A couple of questions ...

First, I'd like to use a $250k HELOC on the FL property for the downpayment on the MD home and finance $1M via a conventional mortgage. Will conventional lenders have any issues with my use of HELOC funds for the downpayment? I have about $100k in cash reserves.

Second, what will the lender look for to determine rental income on the FL property if it is not yet rented? Is it even possible to do this without a lease in place?

Any other thoughts on this strategy would be greatly appreciated!

If relevant, I also own a cash flowing rental property in NYC worth $1.3 that has $750k in equity in it. The reason I am planning to use a HELOC on the FL property where I have less equity is it's still my primary, so lower interest rates.

Finally, my W2 job is around $350k a year. 

A $1m loan on a $1.25m owner occupied SFR will be a "jumbo" loan. Fannie Mae and Freddie Mac guidelines will not apply.

Each individual lender will have their own different guidelines & requirements for "departing primary residence" rental income.

Hint hint: the ones with the most liberal Fannie-like guidelines will not have the best rates, and the ones with the best rates will require two years of rental income on tax returns to "count" that rental income.

I'd suggest an independent mortgage broker in Maryland, who will collect all your docs, and shop both the scenario and interest rate pricing among the marketplace to find the right home for the get-you-in-the-door purchase loan. Once you have that rental income on two years of tax returns, you will be refinancing to one of the more conservative jumbo loan programs.

Note, again, Freddie Mac and Fannie Mae guidelines are irrelevant here. This will be a non-conforming loan.

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  • Kyle DeutschmannPro Member
    Investor · Washington, DC · Member since 2017 · 428 posts · 205 votes
    7y

    @John White hey John, you shouldnt have a problem using the HELOC as a downpayment, but the added monthly payment will have to be included in your debt-to-income ratio. You likely wont be able to use the expected rent from the Florida home, but if your NY property has been rented for the past two years then you could use that income in addition to your W2 income (if its even needed since you have a great salary to begin with), although will your current W2 job allow you to transfer or work remotely from Maryland or will you be switching jobs? Also what part of Maryland are you moving to? I grew up there and know several great Realtors if you need a referral

    [email protected]
    0Reply
  • John White
    OP
    Member since 2019 · 3 posts · 2 votes
    7y
    Originally posted by @Kyle Deutschmann:

    @John White hey John, you shouldnt have a problem using the HELOC as a downpayment, but the added monthly payment will have to be included in your debt-to-income ratio. You likely wont be able to use the expected rent from the Florida home, but if your NY property has been rented for the past two years then you could use that income in addition to your W2 income (if its even needed since you have a great salary to begin with), although will your current W2 job allow you to transfer or work remotely from Maryland or will you be switching jobs? Also what part of Maryland are you moving to? I grew up there and know several great Realtors if you need a referral

     Hi Kyle, 

    Thanks for the response. Regarding FL rent not being included, would this change if we were to get a lease in place? The NY property has been rented for seven years but has limited NOI (that's a whole other issue...). Good question regarding my W2 job. I am considering a couple of options right now, including relocating with my current employer or taking a similar position with a new company. Does that factor in?

    In terms of Maryland, we are focused on Bethesda. If you have any realtor referrals that know the area well please do send them my way! 

    Thanks,

    John

    1Reply
  • Kyle DeutschmannPro Member
    Investor · Washington, DC · Member since 2017 · 428 posts · 205 votes
    7y

    Hey John, let me send you a DM to answer the rest of these and to connect you with my Realtor referrals in that area

    [email protected]
    0Reply
  • Raymond J. RodriguesBusiness Member
    Lender · Miami, FL · Member since 2017 · 1k+ posts · 797 votes
    7y

    @John White you can use 75% of your rental income from your Florida property to count towards your MD purchase DTI. You just need a lease and security deposit in place(in no way am I promoting fraud). In regards to a loan amount of 1mill and obtaining a conventional mortgage in MD is not possible. It will be a jumbo mortgage.

    [email protected]619-456-8311
    Helm Mortgage Corp.5126 Reviews
    WebsiteView Page
    0Reply
  • Chris MasonPro Member
    Moderator
    Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
    7y
    Originally posted by @John White:

    Hi all, 

    I've been poking around the forums where there is a ton of great advice but I didn't see an exact answer to my situation. 

    I currently live in Florida where we own a property that would appraise around $800k ($450k in equity in the house). In the next few months I will be relocating to Maryland and plan to i) rent my current FL home (will rent around $5k a month) and ii) buy a new home in MD around $1.25M. A couple of questions ...

    First, I'd like to use a $250k HELOC on the FL property for the downpayment on the MD home and finance $1M via a conventional mortgage. Will conventional lenders have any issues with my use of HELOC funds for the downpayment? I have about $100k in cash reserves.

    Second, what will the lender look for to determine rental income on the FL property if it is not yet rented? Is it even possible to do this without a lease in place?

    Any other thoughts on this strategy would be greatly appreciated!

    If relevant, I also own a cash flowing rental property in NYC worth $1.3 that has $750k in equity in it. The reason I am planning to use a HELOC on the FL property where I have less equity is it's still my primary, so lower interest rates.

    Finally, my W2 job is around $350k a year. 

    A $1m loan on a $1.25m owner occupied SFR will be a "jumbo" loan. Fannie Mae and Freddie Mac guidelines will not apply.

    Each individual lender will have their own different guidelines & requirements for "departing primary residence" rental income.

    Hint hint: the ones with the most liberal Fannie-like guidelines will not have the best rates, and the ones with the best rates will require two years of rental income on tax returns to "count" that rental income.

    I'd suggest an independent mortgage broker in Maryland, who will collect all your docs, and shop both the scenario and interest rate pricing among the marketplace to find the right home for the get-you-in-the-door purchase loan. Once you have that rental income on two years of tax returns, you will be refinancing to one of the more conservative jumbo loan programs.

    Note, again, Freddie Mac and Fannie Mae guidelines are irrelevant here. This will be a non-conforming loan.

    2Reply
  • John White
    OP
    Member since 2019 · 3 posts · 2 votes
    7y
    Originally posted by @Chris Mason:
    Originally posted by @John White:

    Hi all, 

    I've been poking around the forums where there is a ton of great advice but I didn't see an exact answer to my situation. 

    I currently live in Florida where we own a property that would appraise around $800k ($450k in equity in the house). In the next few months I will be relocating to Maryland and plan to i) rent my current FL home (will rent around $5k a month) and ii) buy a new home in MD around $1.25M. A couple of questions ...

    First, I'd like to use a $250k HELOC on the FL property for the downpayment on the MD home and finance $1M via a conventional mortgage. Will conventional lenders have any issues with my use of HELOC funds for the downpayment? I have about $100k in cash reserves.

    Second, what will the lender look for to determine rental income on the FL property if it is not yet rented? Is it even possible to do this without a lease in place?

    Any other thoughts on this strategy would be greatly appreciated!

    If relevant, I also own a cash flowing rental property in NYC worth $1.3 that has $750k in equity in it. The reason I am planning to use a HELOC on the FL property where I have less equity is it's still my primary, so lower interest rates.

    Finally, my W2 job is around $350k a year. 

    A $1m loan on a $1.25m owner occupied SFR will be a "jumbo" loan. Fannie Mae and Freddie Mac guidelines will not apply.

    Each individual lender will have their own different guidelines & requirements for "departing primary residence" rental income.

    Hint hint: the ones with the most liberal Fannie-like guidelines will not have the best rates, and the ones with the best rates will require two years of rental income on tax returns to "count" that rental income.

    I'd suggest an independent mortgage broker in Maryland, who will collect all your docs, and shop both the scenario and interest rate pricing among the marketplace to find the right home for the get-you-in-the-door purchase loan. Once you have that rental income on two years of tax returns, you will be refinancing to one of the more conservative jumbo loan programs.

    Note, again, Freddie Mac and Fannie Mae guidelines are irrelevant here. This will be a non-conforming loan.

     Thanks, Chris. This is very helpful. Much appreciated.

    0Reply
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