Financing options, buying second house and renting out my first house.?

[wynn]

Looking for some direction on buying a second home (Utah) (short sale); as my primary residence. I am currently renting my first place out, I have renters under a 1yr agreement since April 2011; this house I bought Feb 2008, it has a FHA loan. I want to be able to get the best financing options on the new place. I'm planning on renting out the mother in-law apt (basement) in the new place and having that agreement ready before closing. Would that help me with financing? What info would the bank need to prove that my other property is a rental? Any info would be great.

[kendon19]

You have to have a 2 year rental history to be able to claim rental income.. tax returns showing it is what we ask for. FHA only allows one loan at a time in almost every case so you will need more down payment since you won't be able to go FHA. They won't count the rent on the mother in law property since you haven't had it for 2 years.

[egan]

Actually having renters in your new place would not help you with financing. In fact, if that is your primary residence, you should not be renting it out. If the bank treat the new place as an investment property, your financing will be very different. It is going to be hard to get financing on your second property, especially when you still have a mortgage on your first one. Unless you have great equity on your first, I can't imagine banks will give you a mortgage on your second.

[demarco]

There are a lot of issues here.

First, you will NOT be able to get a 2nd FHA loan since you already have one in place on the first house. So this will limit the type of loan you will need. Talk with a lender about options.

Having the MIL apartment rented before settlement WILL not be used. You are trying to purchase as your primary home. I would in fact, forget this and not mention it to the lender.

Do you have any equity in the first house. In order to use the rental income from the first house to off set the mortgage, you need AT LEAST 30% equity in the first house. If you have less then 30%, your personal income will need to be large enough to carry BOTH mortgages. And by large enough, I mean per the ratios the bank uses, not what you think you can do. This would also be on top of other debt you would have (car, credit cards, etc)

[patwin87]

The rent you collect now won't help, you son't have enough of a history. Second house will require a 20% down payment.