How much equity is needed to keep current home and purchase another?

[Average_Joe]

I currently own a condo and have been considering purchasing a tri-plex or 4-plex as an income property (since rates are so low). My condo is worth about $110,k, and and I owe $91,k on it. The 4-plex properties I'm looking at sell for about $350,k in my area. I'm looking to finance the new place with a conventional, single-family mortgage and have at least $35,k to put down, maybe up to $50 or $60,k. I was thinking of selling my condo (which I would break even on), and start new. But I'm expecting that it will take months to sell the condo, and it would be so much easier to find a renter and throw some cash at it if it's possible. Would I still have to qualify for both the new mortgage and the condo mortgage if I have, say, 70% equity and a rental agreement?

Any help is greatly appreciated!

[StartingOver10]

You still have to qualify for the current property and the new mortgage because the rental income can't be used since it is not yet rented. To use rental income you have to show at least 2 yrs history. Now if you had several properies you rented, and they were all reported on your tax returns, then you could show a lease and use the income. But since this is a new venture for you, you have to show a history of handling rental property. Kind of a catch 22 for the first rental.

[Average_Joe]

Catch 22 indeed! Same/similar rules apply to FHA?

[austinguy907]

i think you meant to say 70% LTV on the condo.  if you have the cash on hand for the DP on the new place already and you DTI supports both properties you could probably pull it off with the right lender.

[pdog661]

Hi,

I just went through this process this month.  I had to support both mortgage, and still stay under the 45% DTI ratio.  

You will also need more reserves on hand to qualify.  We were required to have 3 months of the new payment, and 6 months of the first payment for reserves.  We both had 740+ credit scores.  If we were below 700 we needed 6 months of the new payment, and 12 months of the second payment as reserves.

Some banks will allow you to include rental income if you have >30% LTV ratios, and some do not.