Question: We look good on paper. Or do we?

Sublimity — Thu, 28 May 2009 23:10:34 -0800

Any mortgage professionals in the house? I have a question about lending standards for small-scale real estate investors.

My family is moving across the country this summer. My husband and I have a rental house and a residence in our current city. We are trying to decide whether to sell the house we now reside in, or to keep it and rent it. We'd like to keep it, if possible, but a big consideration is how this small portfolio would impact our ability to buy a house in our new city.

This article describes how lending standards have tightened in recent months when someone buying a house wants to keep their former residence. It sounds like 30% equity is an important threshhold with respect to the kind of cash reserves needed, and whether the bank will count rent monies toward payments on a rental house.

My question to the lenders in the audience is: in a situation like ours, would that 30% pertain to each individual house, or to the entire (small) portfolio?

I understand that You Are Not My Mortgage Broker. I just want to know in general how lenders think about these things.

When both houses are taken together, we're at about 37% equity. Individually, though, the rental is at about 65% and our residence is at about 10%. Conceivably we could do some refinancing to slosh the money around if needed, though I'd prefer not to if it weren't absolutely necessary.

Additional information that may prove relevant: rents would pretty much break even w.r.t. PITI + management fees. We understand that we'd pay for repairs and upkeep out of pocket and don't anticipate that will be a problem.

Thanks in advance for the help.

Comments on: We look good on paper. Or do we?

Question: We look good on paper. Or do we?