[Jeremy]

Beginner real estate question: We’ve lived in our current house for 4 years (in California).

If we move out of this house, turn it I to a rental, and then buy a new house (in California), what type of down payment would we need?

Could we do an FHA loan and only need 3.5%?

[Dawn]

That shouldn’t be a problem, but I would choose to do conventional over FHA if you can, especially if you plan on keeping the home long-term.

The mortgage insurance never drops off an FHA loan, but it will eventually off of a conventional loan.

[Serena]

Do you have an FHA loan with your current primary that you will be converting to a rental? If not, you should be able to get an FHA loan.

I am not sure if you can have 2 at the same time (if you already have one).

[Tara]

I would plan on at least 5% down. That is the real simple answer. Definitely talk to someone licensed in California and get your plan out together

[Jennifer]

Speak with a mortgage broker and they will go over loans you will qualify for. We (in California) did something similar a few years ago except we sold Primary moved into one of our rentals and within 2 months had an offer on a new primary.

We did not go FHA…pretty sure that would not have been an option. We had to put a larger down payment down as well.

We definitely had to justify everything we were doing and put 20% down.

We had to show what we were getting for rent on the rental. We did get a really low rate for the time. A broker will definitely be able to see options.

[Rick]

Possible yes. Just don’t leave your equity in the current home as a way to justify its low rent to value proposition.

So, few previous primary residences make good rentals. Most that “do” are by first time landlords fooling themselves with speculation gains.

If you wouldn’t buy your current home as a rental, don’t turn it into a rental.

[Rosemarie]

Yes. Go conventional and it’s completely up to your lender how much you have to put down. Credit unions can be great.

Yes, you’ll pay .05% PMI but the house will appreciate 5-10x that a year.

[Author]

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