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Keep current home as rental & qualify for FHA..how?

Regular Contributor

Keep current home as rental & qualify for FHA..how?

After getting some advice on the boards I decided to ask my mortgage guy can I still qualify for an FHA home and use current property as rental or investment property. With the new FHA loan I would use that as my primary residence. He said I would have to show that I'm able to pay 2 property's. I was thinking about honestly using my home as a HUD rental.

 

Does this sound right? The whole purpose of this is I qualified for a conventional refinance but when I ask about FHA I was told that my DTI was too high, and he also added student loans in with that and they are deferred for 1yr.

Advice needed. I'm not in financial trouble I just need more space in my home & would really like a newer home.

Message 1 of 7
6 REPLIES
Super Contributor

Re: Keep current home as rental & qualify for FHA..how?

In order to use rental income from a primary-residence-turned-rental you'll need to have 25% equity in the home for FHA, and 30% equity in the home for conventional.  If the student loan payments are deferred for 12 months from the closing date, they won't be included for FHA but are always included for conventional.
Mortgages (FHA, VA, USDA, Fannie, Freddie, Non-Prime) since 2002, based in Irvine, CA and lending in all 50 states

Information that is needed to determine if you qualify for a mortgage

Message 2 of 7
Valued Member

Re: Keep current home as rental & qualify for FHA..how?

So I have a current home which has negative equity.  I receive rent on it.  I can afford both that and a new home.  Because I have negative equity will I not qualify for FHA?
Message 3 of 7
Super Contributor

Re: Keep current home as rental & qualify for FHA..how?

Is the home a rental or primary?  How many units?

Mortgages (FHA, VA, USDA, Fannie, Freddie, Non-Prime) since 2002, based in Irvine, CA and lending in all 50 states

Information that is needed to determine if you qualify for a mortgage

Message 4 of 7
Valued Member

Re: Keep current home as rental & qualify for FHA..how?

The condo that has negative equity is my old primary residence.. I took a job out in Phoenix (where I am looking to buy now).   So, it wasn't purchased to be rental property but at this point that's what it has become.

 

Message 5 of 7
New Member

Re: Keep current home as rental & qualify for FHA..how?

I am going to have to assume no on the Neg AM, you need to modify that if you are able, or if you plan on selling I would do it soon, considering it is a rental.
Message 6 of 7
Super Contributor

Re: Keep current home as rental & qualify for FHA..how?


Phoenix_Chris wrote:

The condo that has negative equity is my old primary residence.. I took a job out in Phoenix (where I am looking to buy now).   So, it wasn't purchased to be rental property but at this point that's what it has become.

 


 

So it's not your current primary residence that will turn into a rental, it's already an existing rental property, so as long as you've claimed the rental income on your tax returns you should be fine to include it.
Mortgages (FHA, VA, USDA, Fannie, Freddie, Non-Prime) since 2002, based in Irvine, CA and lending in all 50 states

Information that is needed to determine if you qualify for a mortgage

Message 7 of 7