Daily mortgage market insight that you'd never get from the mainstream media.« Move-Up Homebuyers Face New Lending Challenges This Spring
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When a homeowner sells his home and decides to buy a new one, there are 3 basic options for the residence — sell it, keep it, or rent it.
Unfortunately, no matter which path they choose, move-up homebuyers in need of a new conforming mortgage will find qualifying for a home loan to be more difficult this season than in the past.
Mortgage guidelines are dramatically tighter for people “carrying two mortgages”.
Among the changes this spring’s buyers face:
Selling the primary residence
If you plan to close on your new home prior to the closing of your existing home — even if it’s only by a day – both payments must be listed as monthly debts on your mortgage application. This will disqualify the majority of homebuyers.
Converting your residence to a second home
If your current home has less than 30 percent equity in it, your mortgage application for the new home will not be approved unless you can show 6 months worth of mortgage payments + taxes + insurance in reserves for the current home and new home combined.
Converting your residence to an investment property
If your current home has less than 30 percent equity in it, any rental income derived from a tenant is disallowed on your mortgage application for the new home. You must still count the mortgage payment + taxes + insurance as a monthly debt.
In other words, being a move-up buyer isn’t as simple as it used to be. New lending rules make buying a new home an exercise in timing and financial planning. And the rules are expected to get tougher, too.
Therefore, if you expect to be a move-up buyer in the next 12 months, consider moving up your timeframe or — at least — planning ahead for it.
Understanding the new mortgage landscape and how they can influence your upcoming purchase may be the difference between getting approved for a home loan, and getting turned down.
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Related posts:
- Converting Your Primary Residence To An Investment Property? You May Not Qualify For Your Next Mortgage.
- FHA Mortgage Insurance Premiums Approved To Triple In Cost
- Effective December 13, 2008, Some Conforming Mortgages Will Require Larger Downpayments To Get Approved
- Cancel Your PMI Before It’s Too Late To Cancel It
- Simple Real Estate Definitions: PITI
2 comments to “Move-Up Homebuyers Face New Lending Challenges This Spring”
Does this mean that I can’t buy a new home until I physically close on my current one? If so, I’m in trouble.
Hi, Jack. It MAY mean that. You’re right. It all depends on the amount of home equity in your property and whether or not you earn enough to offset two mortgage payments.