We discussed several options yesterday for borrowers who want to buy new homes before selling their current home. Debt ratios are often an issue b/c borrowers will have two mortgage/housing payments when they buy a new house.

What most people don’t know, however, is that many lenders will NOT count the current residence’s housing payment against debt ratios, once a property is pending with all contingencies released.

Lenders will of course want proof of this (written contracts and addenda).

The other way to mitigate debt ratios is to find a renter for the departing residence and use the rent for income. This only works, however, if there is a 30% equity cushion (25% for FHA). Lenders will not use future rents if the equity cushion is less than 30% (or 25% for FHA).

Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 01524255, NMLS# 335646

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