Program allows rent on former residence so buyers can purchase new home

Mortgage lender: Tom Banducci. Property: Single-family home in San Francisco. Loan amount: $1.15 million. Loan type: 7/1 ARM at 4 percent, no points (4.255 percent APR) Purchase price: $2.01 million. Backstory: Tom Banducci’s clients were looking to move up from their San Francisco condo to a single-family home.

Due to the tight housing inventory, they were nervous about selling their condo before finding the right home. Their plan was to either sell or rent out their former residence once they moved, so they contacted Banducci to see what they could afford.

This approach presented two challenges. The first issue was that the main borrower had only been at his current job a little more than one year. Thus, even though he was receiving bonus and restricted stock unit income as a part of his compensation, underwriters would not allow the extra income without a twoyear history.

The second issue was that Banducci had to debt service for both properties. Without rental income from their condo (their departing residence), the clients were having trouble meeting the debt-to-income ratio requirements for the purchase prices they were interested in.

Many lenders will allow rent on a departing residence as long as the client has a signed lease agreement and proof a deposit check has been deposited in their bank account. Not knowing how long it would take to get their offer accepted on a home, this approach did not seem possible.

With Guaranteed Rate being both a direct lender and broker, Banducci has access to many different underwriting guidelines. After a thorough search he found a program that would allow 75 percent of the market rent — verified in a comparable rent appraisal — to be applied against the clients’ monthly cost of ownership for their condo.

The rent shown was enough to offset most of the PITI (principal, interest, taxes and insurance) payment for the current home and allowed them to qualify for the new home purchase. The happy buyers ratified their non-contingent offer and closed escrow on their new home in 21 days. Tom Banducci, Guaranteed Rate, (415)

694-5522, tom.banducci@rate.com.