Mortgage/renting/new home questions

[sniper7]

Wife and I are looking at moving up to a bigger home and a little land next year.

we wouldn't be moving far away and I have a good friend who has several homes he has as rental properties who would help me out, so I would like to rent our current home out.

potential issues:
current home has FHA loan. We can refi this into a conventional but would probably need to do the next house as a FHA. Is that possible? If not, we would be running pretty thin after putting 20% down on the next one having to do it as a conventional.
are you able to have two FHA loans?
any idea what rates are at for us to refi right now from FHA to conventional. I'd like to get rid of the MIP as it is $208 a month and I'd prefer that $$ to be profit in my pocket or repair fund money than to protect banks from people not paying their bills. Our current interest rate is 3.25%

As far as renting goes, my friend has given me a lot of advice and has a very very solid rental agreement, but any advice on what to watch out for, who to rent to, what to make sure I have in the contract etc would be appreciated.

Thanks for the help.

[kwando]

Not sure if you can do this with a FHA loan, but on a conventional loan you can remove PMI without a refi. You just pay the mortgage company to order an appraisal. Since values have gone up in CO, it's pretty much guarantee you're over the 75/25 or 80/20 loan to value

[sniper7]

I believe I read the same thing, basically FHA is no matter what the house is appraised for and no matter if you pay 20% of the loan in cash now, the pmi doesn't come off until a set date where it is 80% of the loan to original loan value ratio.

that is why I am considering refi the rental home to a conventional and pay the 20% of it now to get rid of the PMI and lower the payment as well, then get then get an FHA with the new home. I'm just curious if this is even possible and worth my time to refi right now and spend that $$ out of pocket when I would just end up having to sell the house anyways and the equity would be applied to the new home.

[TheGrey]

Don't rent to someone on HUD vouchers without doing a thorough background.
Be sure to do a thorough background on potential renters- don't pay for one of those online backgrounds.

Make sure your rental contract is iron-clad, and don't be a softie. If you don't stick to your guns, you chance renting to someone that will end up costing you money. If you have a 'no pets' clause, the moment you allow them to have pets means you lose any control over your home: 15 cats, or a pack of pit bulls or beagles that will eat the bottoms of every door in the house. Give an inch, and they will take a mile. Sob stories tend to leave landlord$ de$titute and without recour$e for monetary recompen$e.

I realize there are very fine renters out there in the world, but being completely cynical can save you money and heartache.

Any changes to your rental contract needs to be in writing, signed and dated by both renters and landlord.

Be aware that you can put in anything you like in your contract- so DO. My parents were landlords, and learned the hard way. There are some powerfully stupid people out there. My folks had to put the following into the rental agreement:

That the renters:

-use trash bags in the trash cans
-that trash bags must be tied and contained in covered trash cans, and may only be set out the night before trash pick-up
-if pets are allowed, any animal waste must be picked up X number of times per week
-emergency repairs must be reported to you immediately (or specific contractors must be called, etc)
-any damage must be reported to you within X hours
- the landlord will give X hours notice before walk-throughs
- don't allow smoking (of anything)
- put in a clause about forbidding any "marijuana grow operations" inside or outside of the house; you may forbid the presence of pot plants altogether
- anything that makes your job as a landlord harder. If you don't want them to put nails into your walls, you can add that. If you don't want them to paint the walls, you can add that.

It's definitely a landlord's market. You can be as picky as you like. This is your home; make sure you rent to someone that doesn't have a habit of burning landlords and trashing the homes they use. Make sure that they don't have a ton of judgments following them, and make sure they don't have a criminal record.

Sorry for the long post; you probably knew all of this anyhow. Good luck!

[Monky]

What's wrong with a pack of pits?


Sent by a free-range electronic weasel, with no sense of personal space.

[Wulf202]

All good advice. One thing that hasn't been mentioned is the mental switch from this being your house to it's just an investment property. You need to seperate that mentally so you dont take it personally when they knock a hole in something.

[Great-Kazoo]

IMO. I'd refi the house with enough $$ for a down payment on #2. If you do that, you avoid another FHA loan, plus all the added expenses.

[gnihcraes]

When letting a potential renter look at the property, go outside and look through the windows of their car. If it's a mess, they will treat your rental the same way.

not sure how much advice this guy would have for free, but I like what they cover on the tv show.
http://scottmcgillivray.com/

[HoneyBadger]

All good advice. One thing that hasn't been mentioned is the mental switch from this being your house to it's just an investment property. You need to seperate that mentally so you dont take it personally when they knock a hole in something.

This is the hardest part, IMO

[Irving]

I don't believe the Mortgage Insurance falls off of an FHA loan anymore. Depending on how long you've had your loan, it may or may not, so call and ask. I had to refinance my loan into a conventional to get it to come off.

If you do plan to refinance and use as a rental, are you going to refinance for the current value and use the equity to pay for the down on the new house? If so, make sure the rent you can get from the rental will cover the new mortgage amount.