This update establishes guidelines for situations where people buy one home with the intention of defaulting on their current residence, which is known as “buy & bail”. These changes delineate the circumstance in which an underwriter may include the income documented from a valid rental agreeement for the current residence.
Here are the 7 things you need to know about these changes
- This is a temporary change, and effective as of September 19, 2008.
- The borrower must be relocating to a new job location.
- The new home must be outside reasonable commuting distance from the current residence (UW’s discretion).
- The borrower must have a fully executed lease with at least a 1 year term from the closing date of their new mortage.
- The borrower must document receipt of the security deposit and/or first month’s rent.
- Current residence must have an LTV of 75% or less.
- The value of current residence can be proved with the following: appraisal no more than 6 months old, or original HUD-1 and current bank statement.
This is a Fannie Mae guideline and Freddie Mac will soon follow. If you are in Gwinnett County and are in this situation, give a mortgage professional a call.
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