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).
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