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[quote=Anonymous][quote=Anonymous]
 
So, here's my question.

1. Do I really need to put 20% down? I'd like to have some actual cash in savings for emergencies.  
2. Can we somehow convert some of the renovation budget into the new mortgage?
3. If we don't find something we love, would it make sense to just rent a place?

Apologies. I've always been anxious about money, and we put 20% down for our current home about 8 years ago, so not doing that also worries me a bit. But I hate to rent b/c I equate it to just throwing money away. And I'd love a home, a real home (not just a condo) for our DC.

TIA[/quote]

1) No, if you both have excellent credit you should be fine with 10%. But be aware that not all lenders will accept your anticipated rental income, so you may need to qualify by being able to carry both mortgages, with no rental income. Some lenders will accept a signed lease as proof of prospective income. Fannie Mae guidelines allow this but it's a matter of lender risk appetite.

2) Generally, yes, but it depends. The St Louis poster above is talking about a specific product where you do construction/reno immediately on the house. If you have no set schedule for the renos you would be better with a home equity line of credit.

3) It really depends on where this place is and whether you would stay. Some real estate markets are on an upswing and it makes sense to buy for 5 years (DC). Some are in long term decline and it may be wiser to rent (Cleveland). Some feel like gambling in a casino (Detroit, Las Vegas).

Find a good mortgage broker in this new city, who you can trust.

As other PPs pointed out, your cash flow margin on your condo before the tax benefit is currently very slim. But it will improve a lot if you hold it for 15-20 years until your kid is in college, as you intend.

Hope this helps. Good luck!

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