St. Louis Mortgage Rate Update; Do I need to sell my home to buy another?

MAYBE…Many of my clients and prospects outgrow their current home, or relocate due to a job transfer.  Regardless of the motivation for keeping one property while purchasing another, let’s address this question with the mortgage approval in mind:

Do I Have To Sell? No you do not have to sell if you are in a financial position where you qualify, i.e. Debt-to-Income Ratio is satisfactory and on paper you can afford both your current residence and the proposed payment on the new home.  However, the borrower in this case must give consideration to other or additional expenses when maintaining multiple properties…increased property taxes, insurance costs, maintenance, un-expected repairs when making that decision.

What If I Rent My Current Property? If you’re not quite qualified to carry both mortgages, you may have to rent your current property in order to offset the mortgage payment.

In the old days, the lender would typically count 75% of the monthly rent you are proposing to receive on your current home. However, current requirements require at least 25% equity in your current home before any expected rental income can be counted to offset your current housing expense.  So if you are going to receive $1000 a month in rent and your current payment is $1500, the lender is going to factor in an additional $750 of monthly liabilities in your overall Debt-to-Income Ratios if you have at least 25% equity in your home.

In addition, many lenders require six months reserves on the old property, as well as six month reserves on the new property.  So, if you have a $1000 payment on your old house and a $1500 on your new home, you would need to show $15,000 in reserve.  Reserve requirements are incremental to the down payment on the new property.

What If I Can’t Qualify Based On Both Mortgage Payments? This answer is pretty straightforward: you will have to sell your current home before buying a new one.

Although every situation is unique, it is not uncommon for homebuyers to qualify for a mortgage on a new home while still living in their primary residence…it just depends.

St. Louis MORTGAGE INTEREST RATES for March 28, 2012:

  • Conventional 30-Year Fixed 4.125%/ 4.320% APR
  • Conventional 15-Year Fixed 3.250%/ 3.390% APR
  • Conventional 5/1 ARM 2.750%/ 3.019% APR
  • FHA/VA 30 Year Fixed 3.750%/ 3.991% APR
  • Jumbo 5/1 ARM 2.75%/ 3.01% APR
  • Jumbo 15 yr Fixed 3.375%/ 3.630% APR
  • Jumbo 30 yr Fixed 4.750%/ 5.010% APR

*The above mortgage rates are based upon an 80% LTV, o/o single family with FICO scores of 720.

Paramount Mortgage is a locally owned Mortgage Banker celebrating our 41st year. Great rates and programs are secondary to what is most desired in a lender relationship: Integrity, Communication and Customer Satisfaction. Be to check out our website: www.paramountmortgage.com

For more information or if you have questions on mortgage rates you may contact me by phone at my direct line, (314) 372-4319, email at rfishel@paramountmortgage.com or you can visit our company website at http://www.paramountmortgage.com.

 

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