I'd like to buy a new home, but I'm not sure that I'd like to sell my current home. Can I rent it out to a tenant rather than selling?

We often hear this as one of the first questions when we meet with clients. They are ready to move up or move down or just move to the next neighborhood over, but not sure what options they have when it comes to their current home. This is an important piece of the puzzle as we look at a family's overall picture.

For those who would like to consider renting out their current home rather than selling, there are some special guidelines we must follow. When considering the mortgage on your existing primary residence, current underwriting guidelines require that we use the payment on that mortgage along with all other monthly payments on debt when calculating your debt-to-income ratio. That is, we must add your new proposed house payment on the home you'd like to purchase, plus your current house payment, plus all other debt payments (such as car payments, student loan payments, credit card payments, etc) and then calculate the applicant's debt-to-income ratio from the entire package. Consider the example below:

If this family's total gross monthly income is $7,100 before taxes and deductions the debt-to-income ratio would equate to 43%. This family would likely qualify just fine with both house payments. That is, they could move forward with the purchase of the new house without the underwriting requirement of determining what they would like to do with the disposition of their current home. They could rent it out, sell it later, whatever they like.

But what if they would like to qualify for more on the new house payment? If they already have a tenant lined up, then there are some cases where we can use the income from the new tenant to help the buyer qualify for more. The underwriting guidelines allow us to use the income from the tenant if the applicant has at least 30% equity in their current home (if applying for Conventional financing on their new home) or 25% (FHA). Another scenario that allows us to use the income from the tenant to help qualify is when the previous home had already been rented out and that rental income is demonstrated on the most recent federal tax returns.

For some clients, renting out their current home can be a viable alternative to selling their current home. But this is a puzzle piece that definitely should have the input of your real estate agent and your financial planner. Fortunately for our clients, I have the CMPS designation which qualifies me to help them integrate the financing on their new home with their overall financial plan. So meet with your financial planner, meet with your real estate, then meet with me and we can put each of the pieces in just the right place. (And if you would like a referral to a great professional, just let me know).

I was sitting with a friend at lunch the other day and she mentioned how much she appreciates getting a "do-over" each morning. What she meant was, how nice that we can begin each new day with a fresh start. By simply opting to shake off yesterday, we can choose to approach each day for the gift that it is - a clean slate.

I think this is one of the things I enjoy most about each New Year holiday. We get the opportunity to reflect back on the past, say a proper farewell, then welcome in the coming year with optimism and hope.

As many do, our family will often celebrate the closing of the old year with a gathering of loved ones, a champagne toast, and watching the ball drop in Times Square. Then the next day, we gather at my Aunt's house for the traditional black-eyed peas. It is this goodbye to the old year and hello to the new that makes me think of a fresh start.

Lately I've been hearing many reflect on what they've accomplished over the past year. Indeed, let's celebrate the accomplishments! For example, in our office, we've had the privilege of helping over 140 families and individuals with either the purchase or refinance of their home. It is such an honor that these families have chosen us to help them achieve their dreams!

Though 2010 was a blessing and we have much to be grateful for, I am now eager to hit that reset button, wipe the slate clean, and paint a new picture for 2011. This is an incredible opportunity, a gift, to be able to start with a clean canvas - let us begin!