One of the classic conundrums in buying a house is that buyers need to sell their homes before they can buy their new property. Even if they have the funds to close the transaction, for most people, having two mortgage payments at the same time (on the old and new house) means that their debt-to-income ratios fail to meet the lender’s standards.
However, the rules for Fannie Mae and Freddie Mac both have a loophole that might let you buy a new home before your old house closes without having to rent out your old home. It all hinges on whether or not you have found a buyer.
Fannie Mae’s rules say that you can exclude the mortgage payment on your existing home if you have a buyer with an executed purchase agreement without a financing contingency. This means that once the buyer for your existing home passes their financing contingency, you can close on the purchase of your new house.
If your mortgage is underwritten by Freddie Mac, the rules are even more flexible. Like with Fannie Mae, you can exclude your existing monthly mortgage payment from the debt-to-income ratio relative when your buyer’s financing contingency goes away.
However, where things get really interesting is that if you are relocating and have an employer relocation benefit, a relocation company will take responsibility for your old loan. You can exclude that existing mortgage payment from the debt-to-income ratio and close on your new mortgage prior to selling your existing house.
These rules can be complicated. They also require you to have the funds to close on your new home without the proceeds from the sale of your existing home. Nevertheless, a loan officer who understands these intricate guidelines can give you some additional flexibility and help you get into your new home more quickly.
If you are interested in taking advantage of these rules, work with both a real estate agent and mortgage broker that understands them and can help you structure your transaction appropriately.
To schedule an appointment to review your specific
situation please give me a call at 801-206-4343.
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