Interested in purchasing a home, but have not sold your existing property? 
I’m not an advocate of buying before selling in today’s market unless you understand and are comfortable with the risks involved, but if you insist on going this route, according to Rich Hirsh, from Mortgage Masters, here are Fannie’s guidelines:
If you are applying for a conventional loan, Fannie Mae requires that you either have 30 percent equity in your CURRENT residence OR 6 months cash reserves for BOTH homes.
Home Buying Scenarios
#1 – Current Home is SOLD but not CLOSED prior to purchasing other one.
Must qualify for BOTH house payments and have 6 months worth of payment reserves for BOTH homes
UNLESS
There is an executed purchase contract and all finance contingencies have been cleared on the home you are selling
OR
Have 30 percent equity in current residence (Appraisal/BPO) PLUS 2 months worth of payment reserves for both homes
#2 – Existing Home Converts to Second-Home Status
Must qualify for BOTH house payments
AND
Have 6 months worth of payment for BOTH homes
OR
Have 30 percent equity in home being converted to 2nd home
(Appraisal /BPO) PLUS 2 months worth of payment reserves on BOTH homes.
#3 – Existing Home converts to Rental Property
Must qualify for both house payments AND have 6 months cash reserves for BOTH homes
UNLESS
Rental income can be used to offset monthly payment ONLY if home being converted to rental has 30% equity (Appraisal /BPO) AND home is leased AND security deposit has been verified.
The bottom line: If you are buying a home without selling your current home, there will always need to be cash reserves after closing in the amount of 6 months PITI unless there is 30 percent equity in their current home. Then you will need 2 months reserves!
Rich Hirsch Mortgage Master Inc. Phone: 908-410-9066 eFax: 908-325-0018 rhirsch@mortgagemasterinc.com
Joy
Joy Daniels, GRI, ABR, CSP, e-PRO
JOY DANIELS REAL ESTATE GROUP, LTD
2793 Old Post Road, Suite 200
Harrisburg, PA 17110
(717) 695-3177 office - Call TODAY and let me help you find your dream home!
Joy@JoyDaniels.com - Email TODAY and let me help you find your dream home!
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