As if things weren’t hard enough for existing homeowners, recent FHA changes have made it more restrictive for those looking to move. In a recent letter, FHA is saying if you own a home that you are going to rent out so you can buy a new home, you better be able to afford both payments.
Traditionally, you could use the rental income you would receive from a new tenant to offset the current house payment, to help you qualify for the new home. Recently FHA has seen an alarming trend of people who are buying new homes at discounted prices, and then letting go of their over-financed house afterwards. They are referring to this as “buy and bail.”
To combat this practice – which hurts overall housing because it contributes to another foreclosure on the market -they are only allowing rental income to be used when the borrower is vacating a home which has at least 25% equity. How do they know – the buyer has to pay for an appraisal in many cases.
So if you own a house and want to move into a new one, you need to either make enough to cover both loans comfortably, or you can use the rent to qualify you if your house has good equity in it (25% or more). In either case, though, you will likely be paying for 2 appraisals. Sheesh.
More than ever, do not assume your buyers qualify without getting them pre-approved with an experienced loan officer who will thoroughly analyze their situation and offer FREE Rock Solid Lender Submission Pre-Approvals. Don’t guess – call us 954-217-9518 or 877-8GO-GREEN
More FHA RULES posted on our FHA reference page here.
