One of the most common scenarios I work through with move-up buyers in Washington State is this: you want to buy your next home, but you’re considering keeping your current home as a rental rather than selling it. Maybe you’ve built significant equity and don’t want to give it up. Maybe the rental income would help offset your new mortgage payment. Maybe you simply love the neighborhood and want to hold onto the property long-term.

Whatever the reason, converting your existing home to a rental while buying a new one is entirely doable — but the mortgage guidelines are more complex than most buyers expect. The rules differ significantly depending on which loan program you’re using for the new home, how much equity you have in the departure property, and whether you have a signed lease in hand.

Here’s what you need to know. [Read more…]