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We own a very nice End Unit Town Home in Southern Maryland, outside of DC. In the fall/winter, we may have an opportunity to move a little further South for better jobs/living scenario. We have only owned this house for a little over a year, however, we bought it as a foreclosure and have made some great additions and updates. I would estimate we have added about 30k in value or so.
I would ideally like to sell this house - but it will be difficult to do. So if we have to rent our town house out (it will be fairly easy to rent out due to its location and being able to offer a great price compared to others). We would potentially be able to make $500 in profit a month, (not including if we paid a percentage to a management company).
We would be moving to a different state.
With that being said - how would we proceed about moving into a new home, and possibly purchasing a new home.
Would it be best to rent for a couple of months in a new location, and have the new job salaries under our belts?
Would it be best to try and get approved for a loan before we head down, how long do loan approvals last before the expire if we still wanted to wait a few months?
Should we wait until we have a renter to try and get approved for a new loan? How does that even work?
Has anyone been in this situation before?
Thanks!
P.S. I posted this same thing under a different Title - but I couldn't figure out how to change the Title or Edit the post.....
1. You have to prove to the new banks you have at least 20-30% of equity in your current home in order for the rents to be counted as income.
I know the DC area has maintained well in terms of home values. Saying that, Southern Maryland is not in the same league as "DC area proper" like the closed in suburbs of Chevy Chase, Bethesda or even further away as Rockville. So home prices out in Southern Maryland (I assume Charles County? or somewhere near there), still may be depressed.
If you have 20-30% equity you may be able to qualify for a new mortgage and have those rents count as income. Obviously lenders are concerned about the "buy and bail" strategy that occurred in late 2008/most of 2009.
2. If you can afford 2 mortgages (your current Townhouse and your new home) than rental income becomes a mute point.
3. The other thing is lenders may want to see your rental income for at least 12 months before approving you for a mortgage also.
1. You have to prove to the new banks you have at least 20-30% of equity in your current home in order for the rents to be counted as income.
I know the DC area has maintained well in terms of home values. Saying that, Southern Maryland is not in the same league as "DC area proper" like the closed in suburbs of Chevy Chase, Bethesda or even further away as Rockville. So home prices out in Southern Maryland (I assume Charles County? or somewhere near there), still may be depressed.
If you have 20-30% equity you may be able to qualify for a new mortgage and have those rents count as income. Obviously lenders are concerned about the "buy and bail" strategy that occurred in late 2008/most of 2009.
2. If you can afford 2 mortgages (your current Townhouse and your new home) than rental income becomes a mute point.
3. The other thing is lenders may want to see your rental income for at least 12 months before approving you for a mortgage also.
So 3 scenarios to think about.
Thanks! I appreciate it! I'd have to sit down and mess with the numbers... I wish we could sell the house and we will try to.... but I'm trying to plan for all scenarios.
We have great credit - no debt besides the house of course... We will have my car paid off by the time we move... and that's it.
I think we could barely afford the two mortgages - but without much else of course... that would be the worst case scenario. We also have a small amount in savings...
So when you say 20 - 30% equity in the house.. how would I calculate that? Based off of what we purchased it for, based on what is still owed? Based on what I think around it might be worth now?
Thanks! I appreciate it! I'd have to sit down and mess with the numbers... I wish we could sell the house and we will try to.... but I'm trying to plan for all scenarios.
We have great credit - no debt besides the house of course... We will have my car paid off by the time we move... and that's it.
I think we could barely afford the two mortgages - but without much else of course... that would be the worst case scenario. We also have a small amount in savings...
So when you say 20 - 30% equity in the house.. how would I calculate that? Based off of what we purchased it for, based on what is still owed? Based on what I think around it might be worth now?
20-30% equity means based on what the home is worth right now on July 2nd 2012. Not what you paid for it. Not what you "think" it's worth. It's based on what the current appraisal value of your home is vs. your current mortgage balance.
FYI: I wouldn't try to afford 2 mortgagees "if you barely can afford them". You need to leave yourself some wiggle room in case of life's events (car repairs, medical emergencies, and of course, home repairs).
Although some people hate moving twice if they have to rent in their new town. Just remember, most local movers charge less than $2K for a local move. Local movers usually charge between $100-150 an hour for 2 movers. Takes around 6-8 hours for a local move. So really not looking at much money in the overall scheme of things if you have to move locally again after renting.
20-30% equity means based on what the home is worth right now on July 2nd 2012. Not what you paid for it. Not what you "think" it's worth. It's based on what the current appraisal value of your home is vs. your current mortgage balance.
FYI: I wouldn't try to afford 2 mortgagees "if you barely can afford them". You need to leave yourself some wiggle room in case of life's events (car repairs, medical emergencies, and of course, home repairs).
Although some people hate moving twice if they have to rent in their new town. Just remember, most local movers charge less than $2K for a local move. Local movers usually charge between $100-150 an hour for 2 movers. Takes around 6-8 hours for a local move. So really not looking at much money in the overall scheme of things if you have to move locally again after renting.
Well that scenario for the 2 mortgages would only apply if for some reason we couldn't get a renter... but I'm 99% sure we can very quickly and easily get a renter, if not multiple requests, there are plenty looking in a "high renting" area. And like I said we'd only be renting it out if we couldn't sell it.
I'm not as worried about the moving twice... I'm worried about not being able to sell the house... or taking a really long time to do that, and then missing out on the current buying market with the low rates and/or overall home prices.
But that brings me to my next point.. if we moved, and were still trying to sell the house, but didn't apply for a new loan until after we sold and after we both just started new jobs in a different state, don't they treat jobs differently if you've only been working there a few months? Does it matter to them that you just moved stated when approving a loan? Whether you have positive work history, good credit, and all that jazz? I thought there was some rule of thumb about have to be at a job for a year or a couple of years?
Thanks for helping with all my uneducated questions... when I try to research this stuff I get some helpful hints... but really not a lot that applies to our direct situation.
So when you say 20 - 30% equity in the house.. how would I calculate that? Based off of what we purchased it for, based on what is still owed? Based on what I think around it might be worth now?
Quote:
Originally Posted by aneftp
20-30% equity means based on what the home is worth right now on July 2nd 2012. Not what you paid for it. Not what you "think" it's worth. It's based on what the current appraisal value of your home is vs. your current mortgage balance.
As aneftp states, equity is a term that describes how much you "own" of your house (vs. what the bank 'owns') at any given moment, and is derived from your current house value and the amount currently owed on the mortgage. Basically house value minus amount owed = equity.
A related term you will often see is LTV, or loan-to-value, which is a percentage calculation taken from dividing the current loan balance by the current value. LTV affects a whole host of things, including interest rates you get from a re-fi, and qualification for certain programs.
So for example, if you have a house appraised at 400K, and you still owe 300K on your mortgage, you have 100K in equity (400 - 300) and a 75% (300/400) LTV ratio.
So your equity increases (and LTV decreases) as both your house value increases in the market, and as you pay off your mortgage principal. And, as you probably guessed, on the day you buy your house, your equity = your down payment.
The amount you initially bought it for is irrelevant to these calculations, other than helping give some sense to terms like "underwater" - which means the equity is LESS than 0, and your LTV is > 100%. This would be a situation where you owe 300K on your mortgage, but the house value has dropped to 250K. Obviously not good. So you have negative 50K equity and 120% LTV.
As aneftp states, equity is a term that describes how much you "own" of your house (vs. what the bank 'owns') at any given moment, and is derived from your current house value and the amount currently owed on the mortgage. Basically house value minus amount owed = equity.
A related term you will often see is LTV, or loan-to-value, which is a percentage calculation taken from dividing the current loan balance by the current value. LTV affects a whole host of things, including interest rates you get from a re-fi, and qualification for certain programs.
So for example, if you have a house appraised at 400K, and you still owe 300K on your mortgage, you have 100K in equity (400 - 300) and a 75% (300/400) LTV ratio.
So your equity increases (and LTV decreases) as both your house value increases in the market, and as you pay off your mortgage principal. And, as you probably guessed, on the day you buy your house, your equity = your down payment.
The amount you initially bought it for is irrelevant to these calculations, other than helping give some sense to terms like "underwater" - which means the equity is LESS than 0, and your LTV is > 100%. This would be a situation where you owe 300K on your mortgage, but the house value has dropped to 250K. Obviously not good. So you have negative 50K equity and 120% LTV.
What do you mean by "I think we could barely afford the two mortgages"?
You have to remember that your TOTAL monthly debt ratios (that include BOTH mortgages and other debt obligations) will generally need to only be about 50% of your monthly income...
If you are saying that you would be maxing out your monthly incomes if you had to carry both mortgages, sorry, not gonna happen
What do you mean by "I think we could barely afford the two mortgages"?
You have to remember that your TOTAL monthly debt ratios (that include BOTH mortgages and other debt obligations) will generally need to only be about 50% of your monthly income...
If you are saying that you would be maxing out your monthly incomes if you had to carry both mortgages, sorry, not gonna happen
That is my point of asking these questions....
Who buys another house - rents their current property expecting to have to pay for both? Not many at least....but I do understand sometimes stuff happens, we'd have enough to pay for them both for a few months if we had to...
I'm asking these questions to see if it is even possible to do - or would we have to wait to sell the house even though it will probably take forever.... and if it IS possible, what is the best way to do it.
Didn't know if others had experienced it and could provide input.
Estimated: If we moved, roughly our monthly income would be $4800 (take home), the two mortgages alone would be around $2700 - but our monthly income would increased by about $500 a month if we can count the income from the rental property.
I guess when I say barely I don't like living "tight", or pay check to pay check. I prefer to have plenty of cushion and save as much as possible. We also have a decent amount saved, but I'm sure plenty would go to down payment etc on a new place... but we might just have to suck it up and wait.
I am no mortgage expert ... but in reading your post, I would suggest you sell your current home first. Also renting can be more trouble than what's it worth. That about that as well. Just imagine if you rent and your tenants decide not to pay their, destroy the house and leave. Where would that leave you?
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