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Buyer’s Current House Upside Down?

We frequently have buyers who want to buy a nicer and bigger house, but they think they cannot because their current residence is upside down; they have negative equity.

Such buyers have two options: (1) see if they can qualify for Two properties; and (2) sell their current residence, bringing in the cash necessary to make up the shortfall.

Such buyers are often pleasantly surprised to find out that they Do qualify for two mortgages in today’s low rate environment, especially when some lenders allow 55% debt ratios.

Such buyers CANNOT: (1) say they are going to RENT their current house because lenders do not accept rent as income unless the rental property has a 30% equity cushion; and (2) short-sale their home, miss any payments or walk away from the home because any of these actions will impair their credit too much.

We suggest trying to buy the new home before doing anything with the old home, and then, after getting established in their new home, buyers can do whatever they’d like with their old home without worrying about credit implications.

FINAL NOTE: Buyer’s must have a compelling reason for moving (i.e. better schools for kids) or lenders will disallow the purchase as a potential “buy and bail.”

Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167