Are you considering buying a home that currently has a tenant in it? While it may seem like an easy process, there are a few important things that you need to keep in mind, depending on whether you’re buying the property as an investment or as your primary residence.
If you’re buying the property as an investment, not much has to change. You need to review the lease agreement and make sure that it suits your liking since you’re bound by it. You cannot change to a different rental agreement or evict the current renter to bring in someone new at a higher rent. You also need to ensure that the tenant was properly vetted, and the lease agreement is transferred to your name at closing, along with prorated rents and security deposits.
However, if you’re buying the property as your primary residence, things get more complicated. If the tenant is there when you close, you have to move into the property within 60 days, and you cannot just evict the tenant. You may need to negotiate an agreement between the seller, yourself, and the tenant to end the lease sooner. If that’s not possible, you may need to switch your loan to an investment property loan, which can mean different terms, including a higher down payment, higher interest rate, and higher reserves and mortgage insurance.
When making an offer, it’s important to have exits to allow you to review everything and cancel the contract if necessary. These contingencies are essential to protect your earnest money. Therefore, it’s vital to talk to your mortgage broker as soon as possible, especially if you’re buying the property as your primary residence.
At this point, you may be wondering who you can trust to guide you through the process of buying a home with a tenant. As a mortgage broker, I can help you navigate through the complexities of the process, offer personalized advice on the most suitable mortgage options for you, and help ensure that you have a smooth transaction and a fast closing.
If you’re looking to buy a property that currently has a tenant in it, contact me today for a consultation. I look forward to helping you find the perfect solution for your needs and budget.