Buy before you sell · · Mike Certo, NMLS #260555
Can I rent out my current Arizona home and buy another?
Yes. If you'd rather keep your current home than sell it, you can rent it out and let the rent do the work selling would have done. About 75% of the market rent can offset that payment so it stops counting against you, which means you can qualify for the next Arizona home while keeping the first.
How renting it out lets you qualify
When you apply for the next mortgage, the lender counts your current house payment against you. Rent it out, and most of that rent can cover the payment instead, so it no longer drags down your qualification. In practice we count roughly 75% of the gross rent toward the payment. The other 25% is set aside for the realities of being a landlord, like a vacant month or a repair. The result: your old home turns into income while you settle into the new one.
Signed lease or a rent estimate?
There are two ways to document the rent. The first is a signed lease plus proof you received the deposit and first month. The second, on some programs, is an appraiser's Form 1007 market-rent schedule, which sets the going rent for your home with no tenant in place yet. The Form 1007 route is the one that lets you move before you've found a renter, so you're not stuck advertising the place while you're trying to close on the next house.
The FHA 100-mile rule
One rule trips people up. On an FHA loan, if your new home is within about 100 miles of the home you're renting out, you generally can't use that rental income to qualify unless you can document roughly 25% equity in the home you're keeping. Conventional and specialized programs handle nearby rentals differently. We look at where both homes are and match you to the program that lets the rent count.
When renting beats selling (and when it doesn't)
Keeping the home turns it into a long-term asset and locks in your current financing. But it isn't always the better move. If 75% of the rent comes in below your full house payment, that shortfall gets added to your monthly debts and can actually make qualifying harder. There's also the reality of managing a rental. We run both paths, renting and selling, against your real numbers so you can see which one leaves you stronger before you decide.
See if the rent covers enough to qualify
Send us your current payment, an estimate of what it would rent for, and your target purchase price. We'll tell you whether renting it out clears the path to the next home.
Talk to MikeRelated
- All three ways to qualify without selling first
- What is a Form 1007 rent schedule?
- My home is listed but not sold — can I still buy?
FAQ
Can I use rental income to qualify before I have a lease?
Sometimes. An appraiser's Form 1007 market-rent schedule can establish the rent for qualifying with no signed lease on some programs, though many files still use a signed lease plus proof you received the deposit and first month.
How much of the rent counts toward qualifying?
Roughly 75% of the gross rent counts. The other 25% is held back for vacancy and upkeep. On some programs, if the rent comfortably exceeds the full payment, the extra can even count as income.
Do I need a signed lease to count the rent?
A signed lease plus proof of the security deposit and first month is one standard route. For some programs an appraiser's Form 1007 rent estimate can support the rent with no tenant in place yet, so you're not stuck finding a renter before you can move.
What is the FHA 100-mile rule for rental income?
On FHA loans, if your new home is within about 100 miles of the home you're renting out, you generally can't use that rental income to qualify unless you document roughly 25% equity in the departing home. Conventional and other programs handle this differently, so we match you to the one that fits.
Can renting out my home ever hurt my qualifying?
Yes. If 75% of the rent is less than your full house payment, the shortfall is added to your monthly debts instead of helping. That's why we run both renting and selling for your real numbers and show you which leaves you in a better spot.