Want To Buy An Investment Home In Maryland DC or Virginia And You Already Own A Home?
What are the requirements if you want to purchase a home – but your personal residence is not sold?
Things To Remember:
If you are applying for a Conventional Loan or a Fannie Mae Loan it requires you either have to have 30 percent equity in your current residence OR 6 months cash reserves for both your home and the new home.
Credit history and scores will determine what type of down payment will be needed to purchase. In most cases a minimum of 10% will be required.
3 Home Buying Scenarios:
Existing Home converts to Rental Property:
You Must qualify for both house payments AND have 6 months cash reserves for BOTH homes. UNLESS Rental income can be used to offset monthly payment ONLY if home being converted to rental has 30% equity (Appraisal /BPO) AND home is leased AND security deposit has been verified. Time frame varies on rental income typically at least 6-8 months needed.
Current Home is SOLD but not CLOSED prior to purchasing another one.
You Must qualify for BOTH house payments and have 6 months worth of payment reserves for BOTH homes. UNLESS there is an executed purchase contract and all finance contingencies have been cleared on the home you are selling; OR you have 30 percent equity in your current residence (Appraisal/BPO) PLUS 2 months worth of payment reserves for both homes.
Existing Home Converts to Second-Home Status:
You Must qualify for BOTH house payments, AND Have 6 months worth of payments for BOTH homes OR have 30 percent equity in home being converted to 2nd home (Appraisal /BPO) PLUS 2 months worth of payment reserves on BOTH homes.
The bottom line: If you are buying a home without selling your current home, there will always need to be cash reserves after closing in the amount of 6 months PITI (Principle Interest Taxes & Insurance) unless there is 30 percent equity in your current home. Then you need 2 months reserves!
This is information is believed to be accurate but should not be relied upon without verification with your lender.