Every home buying situation is unique, but there are a number of buyers who qualify for a mortgage loan on another home, while they still reside in their first home. There are a number of reasons why people opt for a 2nd home. Their family might be growing and they feel the need for a bigger house. In some cases, people get a job transfer and have to relocate to a new home. The question here is- are you required to sell before you buy?
Things to Consider
The answer is not a straightforward yes or no as there are a number of factors that come into play. If you are in a strong financial position, you qualify and can afford your present residence as well as the proposed payment on the new home, then you will not have to sell the first home.
Even if you do qualify for a mortgage loan on a second home without having to sell the first, there are some other considerations you will have to take into account. When you plan on maintaining multiple properties, you will also have to factor in all the additional expenses such as:
Higher property taxes
Can You Rent Your Current Property?
There are different possibilities in this scenario as well:
If you do not qualify to carry mortgages on both the houses, you might have to rent the first property to offset your mortgage payment. In this scenario, the lender will then generally count only 75% of the total monthly rent that you will receive.
There is another aspect which has to be taken into consideration. Most lenders have a reserve requirement & equity ratio, and this can be a big hurdle in your path. In some cases, if you plan on renting out your existing home, you are required to have a minimum of 25% of equity to offset the payment with the rent that you will receive.
Without that large amount of equity, you’ll need a significant amount of money in the bank and will have to qualify for mortgage payments on both homes. If you do not qualify for both the mortgage payments, you will obviously have to sell the current house before you buy the new one. For more information about how the process works, contact ResMac Home Loans today.