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What Are The New Rules When You Buy a Home & Current Home is Not Sold or Not Going to Be Sold?

• Determine whether or not your home MUST be sold – you may want to get it listed NOW!
• Get pre-qualified if you intend to keep current residence after you buy another.

FANNIE MAE RULES, As of August 1, 2008. If your client is purchasing a new residence and is retaining their current principal residence (not sold and closed at time of closing) it is MUCH more difficult to qualify. One of the three must apply.

1. Current Home Pending Sale

· Count both house payments, old and new, in qualifying ratios unless there is an executed purchase contract on home being sold, and evidence that the lender’s financing contingencies are cleared.

· Required cash reserves after closing: enough to make six months house payments on both properties; less with documented 30% equity in home pending sale.

2. Existing Home Converts to Second Home

· Count both house payments, old and new, in qualifying ratios.

· Required cash reserves after closing: enough to make six months house payments on both properties; less with documented 30% equity in home converting to second home.

3. Existing Home Converts to Rental Property

· Count both house payments, old and new, in qualifying ratios. Rent may be used to offset payment ONLY if a new appraisal verifies 30% equity, home is leased, and security deposit verified.

· Cash reserves after closing: enough to make six months house payments on both properties.

Bottom Line –

1. Any time you retain ownership of your current home and need to close on a new home, you must qualify with both payments. Only exceptions are:

1. A home that is sold, with a valid purchase contact, and evidence that all financing contingencies are removed; or
2. The current home is to be rented (see #3), with evidence of 30% equity, a lease, and a security deposit.
1. You always need cash reserves after closing in the amount of 6 months PITI for both homes unless there is 30% equity in their current home.