What is Buy and Bail?  Doesn’t sound like a very nice thing to me! 

 

 

 

 

Sometime, you just have to move into a new house before you sell the existing home. You either have to carry both houses or rent out the old one. Some borrowers will not qualify to carry both home expenses, so they tell the lender they will rent out the old one. There is now a trend where borrowers purchase a new primary residence and apply for a loan based on renting (rental income) out the old house. Low and behold they move into the new one and stop paying the mortgage on the old house!  How rude….

 

Banks caught on a while ago. Finally the FHA (Government) figured it out. So, here is the deal:

 

The borrower must qualify for both loans, no rental income is allowed for the property being vacated. Twelve months housing payments for both homes most be in reserve after the closing.

 

Two exceptions:

 

1. When the borrower is moving to be closer to new employment, the rental income may be used.  (I am thinking more than a two hour drive). You have to show a lease good for one year, signed and notarized with cleared security checks from the tenant.  (All this documentation can still be “arranged”)

 

2. When the loan to value for the vacated house is under 75% based on a current appraisal.  (I guess in case of foreclosure, at least they can get there money)

 

I guess this is why the buzz on the street is that the FHA is the next to collapse!

 

Bonne fin de semaine!

Dale Siegel