Rent Your Current Tampa Home & Buy Another? Beware Buy & Bail…
Tempted to buy a new home at today’s low prices and great interest rates but wondering what to do with your current home? Maybe you should just rent out your old home and buy the dream home? If the new home is in the same area, there are some new issues to consider.
Lending guidelines now look for “Buy and bail” scenarios, whereby someone would buy a new home and then allow their previous home to go into foreclosure. This premeditated foreclosure scheme is considered mortgage fraud.
“Buy and bail” has become a major issue for lenders. As a result, innocent home owners who want to buy a 2nd home in the same market face a more challenging environment to obtain a loan. Consider this example from of of my clients:
They enjoy living in their Live Oak neighborhood, but want to move up to a larger home with a pool. Even though they had put a substantial down payment on their current home 3 years ago, the value is now close to what they owe. They decided to rent out their current home rather than sell it…. at least until values recover somewhat, and then purchase another house in the same subdivision which is selling at a huge discount.
In order to avoid “buy & bail” rules with conventional or FHA financing, they would need to prove that they have a at least 30% equity in the old home, and they would need to qualify without using any anticipated rental income from their old home.
« Tampa Bay Housing Starts Plunge 90% | Home | Buy & Bail, USDA Loans on a Pool Home? »
Comments are closed.