Ah, it's been the most asked question I’ve received in this low interest rate, lost cost housing market.
Can I buy a new home if I already own a home?
Well… The simple answer is YES, but just like anytime you are making a large purchase, the lender, wants to make sure you have the capability to repay the money you are borrowing.
Let’s take a look at a few common questions in regards to buying a new home, whether it be for your new primary residence, or as an investment or even a 2nd (vacation) home.
Question #1… I own a home that I currently live in. I want to keep that home and rent it out. Can I do this, and if so, how much do I need to put down on the new home?
Answer #1… Yes, you can keep your current home as a rental property and purchase a new primary residence, as long as you financially qualify to make the payments on BOTH your current home and the new home you want to purchase. Down payment options are the same as any purchase of a primary residence, with as little as 3 ½% down when using FHA financing.
Question #2… I have a renter lined up to rent my current house once I move out. Can I use this income to qualify?
Answer #2… No, you cannot use that rental income to qualify. When moving from one primary residence to a new primary residence, you cannot use rental income on the rented out property for two years. This rental income must be proven with two years of files tax returns.
Question #3… I see some steals out there. I want to buy something as an investment and rent it out. Can I use potential rent for qualifying purposes?
Answer #3… The answer is YES AND NO. If this is the first rental property you are purchasing, you will need to qualify for the entire new payment, including all your current debts.
If you currently have other rental properties and have a two year history of this via filed tax returns of being a landlord, you can use potential rental income to qualify.
Question #4… What are the down payment requirements for an investment property?
Answer #4… You can purchase an investment property with as little as 15% down.
Question #5…I saw a great home on the river is a different state. What are the requirements to purchase this home?
Answer #5… This type of purchase would be considered a 2nd home, or vacation home. You would need to qualify for the new purchase along with any current debts you have. The minimum down payment required on 2nd/vacation homes is 25%.
Hope this helps get the ball rolling for your new purchase!
HAPPY HOUSE HUNTING!