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Lsut81
Chicago Cubs Fan
Member since Jun 2005
68080 posts

Home Loan Question (Refi, rental, purchase)
Was looking to sell my current home and then purchase bigger...

However, due to some circumstance I'm now looking to refi current house to cash out equity and then make down payment on new house, subsequently renting out the current house.

What is the best place to start? Should I do refi first and then apply for new loan? Should I apply for new loan and then refi? Or should I find a local lender, tell them what I'm looking to do and let them handle it?

I mean, I could skip the refi and pull money out of investments for down payment, but I hate to do that.


GFunk
LSU Fan
Denham Springs
Member since Feb 2011
13024 posts

re: Home Loan Question (Refi, rental, purchase)
Way too many unknown variables. Equity stripping and then renting it seems like a drastic alternative to selling and using equity for the new down payment. The new payment will increase your debit to income ratio and if you apply prior to renting it this risk could very well be expressed by the lender for the new property requiring higher down payment amounts or-even worse-a higher % rate.

The riskier a buyer, the less attractive the terms.

But let’s start with: Why are you looking to buy? Why can’t you go with the first option?


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ATLdawg25
Georgia Fan
Atlanta, GA
Member since Oct 2014
3355 posts

re: Home Loan Question (Refi, rental, purchase)
quote:

subsequently renting out the current house

Just FYI, typically the lender will want to see a solid track record of rental history before using rental income in your debt to income ratio on the new loan. If you try to do this all within the time frame of a month or two, you will likely need to qualify for the new mortgage without any supplemental rental income.


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