Lenders Choke The People Looking to "Buy And Bail"

FHA and Conventional Loan guidelines were revised this morning, this time to prevent the so-called “buy and bail” folks trying to escape their overpriced mortgages.

Haven’t heard of a “buy and bail” scenario?  It goes something like this:

Until now, people who decided to rent their home instead of sell it were allowed to claim 75% of the rent on their current property as “income”, which they could use  as income towards the purchase of another home.

There have been people exploiting that to avoid selling their home, and then letting their previous home fall to foreclosure, leaving their lender holding the bag. (This sort of thing is also known as “mortgage fraud” in certain circles…)

The new guidelines are designed to prevent people from doing that.  You can still qualify to use that rental income as revenue towards purchasing another home, but only if you have at least 25% equity in your previous home.

For people with rental properties as investments, this shouldn’t affect you much.  What this does affect is people looking to move their primary residence and don’t have enough equity to sell.  The concept of renting your home until the market gets better may no longer be a possibility.

If you have any questions about how this decision may affect you, please feel free to give me a call!

~Jonathan Benya- Realtor
Century 21 New Millennium
9405-A Chesapeake St
La Plata, MD 20646
301-609-9000
301-653-8116
Southern Maryland Real Estate Blog

Join The SOMD RE Blog Community and get free news and updates via email!

digg_url = ‘http://www.teambenya.com/charles_county_real_estat/2008/09/lenders-choke-t.html’;