Wednesday, September 2, 2009

Seldom Used Way to Buy a New Primary Residence

If a couple wants to buy a new primary residence and keep their current house as a rental, but are worried about qualifying based on the payments for both houses, here's a way to do things that sometimes makes it easier.

If only one spouse owns the couple's current house, and the other spouse can qualify on their own for the new house, then FHA will allow it, as long as the new house is more expensive or larger than their current primary residence. Here's an example: A husband and wife live in a house that only the husband owns (only the husband is on the title and the note). The couple wants to buy a new primary residence. If the wife can qualify for the new loan by herself, then the husband's debt does not have to be counted. Neither the husband's housing payments nor his other debt needs to be considered.

This won't work for everyone because only one person can own the current house, and only that person can be on the note for the current house. Remember that quit claiming someone off a deed does not release them from the responsibility of paying the note. The only way to get off a note is to sell or refinance.

Despite that limitation, though, there are plenty of couples who fall within the parameters of this type of deal. We have closed four of these loans in the past few months.

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