A few weeks ago, I started conversations with freelance writer, Lora Shinn. She was doing an article about people that need to relocate, but cannot sell their current homes. What are the pros and cons of renting versus…uh…just walking away?

 

We went through many points and had a long discussion via email and in person.  We had a lovely chat about New York, Seattle and travel.  Down to business, Lora asked me if I had heard about some new FNMA rule called the “lock and leave” requiring 6 months (payments) of savings for both the old home and new home. This would be when the borrower was keeping and renting the old house while moving into the new home.

 

In my research on the new PMI rules coming out in August, I came upon what she was referring to.  (I did reach out and email Lora the info.  Her article is way more extensive than my blog sound bite. When received, I will post a link to her article.)

 

Here is the nutshell:

 

PMI (Private Mortgage Insurance) is changing the guidelines for rental income.  When a current principle residence is being converted to a rental property, 75% of the rental income can be used to offset the mortgage payment, only if there is 30% of the equity left in the property.

 

Translation please!

 

You can still rent out your old house and get a mortgage to buy a new one if:

 

• You only have a mortgage for 70% LTV of the old house
• You can prove the value by an appraisal (you pay for it)
• You have a NOTARIZED lease from the tenant
• You have a copy of a canceled security deposit check from them deposited into your account

 

And the clincher…….

 

You have 6 months payments of the old mortgage payment and the NEW mortgage payment in the bank

 

There are some caveats and please ask your lender for their specific guidelines. That’s what I know and I am telling you.  Wait for Lora Shinn to give you the entire lowdown.

 

 

Dale  Robyn Siegel