Fannie Mae has informed lenders that when owners seek to convert their primary homes to rental investment property and buy a replacement home with a new mortgage, there will no longer be required minimum equity stake in the current home.
Under previous rules, put in place during the last decade to counter fraud schemes, you needed at least 30% equity in your primary residence if you wanted to convert it into a rental counting the rent towards your qualifying income for a mortgage on a new primary home plus six months liquid financial assets for reserve.
Underwater owners still have to be able to qualify all the standard tests to qualify for the new mortgage including payments on both the old and new mortgages as well as at least a couple of months reserve. They also need to be prepared to handle the duties of being a landlord, collecting rents and managing the property. Then there is the debt on the rental property that needs to be figured out. You can keep it as your rental property as long as it generates positive cash flows or eventually sell the property.
Here are the average asking monthly rents for a one-bedroom, one-bath apartment in May (not including utilities) according to Washington Insights: . Seattle $1,445 . Bellevue $1,635 . Kent $848 . Everett $1,048 . Renton $1,058 . Federal Way $825 . Kirkland $1,359 . Redmond $1,347 Let's find out the costs of buying versus renting.
Fannie Mae's recent policy change in July 2015 may help you becoming a new landlord. The new policy allows homeowners to convert their primary homes to rental investment properties and buy a replacement home with a new mortgage with no minimum equity stake in the current home. It used to be that you must have at least 30% equity in your primary residence if you wanted to convert it into a rental counting the rent toward your qualifying income for a mortgage on a new primary home plus 6 months reserve of liquid assets. This new rule will help in these set of circumstances: . Your current primary home is underwater or little equity. . You want a larger home to accommodate your growing family or want to live in a different neighborhood. . You pass our Pre-Approval test. Some of the benefits of owning investment property:
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