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Renting current home and buying a second home

Hey everyone,

My wife and I currently own and live in a condo in the Bay Area, CA. We just had our son this year and as a result have naturally wanted to start looking for a bigger home to accommodate him and future children. While we are looking for a new home to move into, we'd ideally like to keep this condo and rent it out. However, banks I have spoken to have said that rental income can only count against the first home's mortgage if I have a signed rental/lease agreement as well as security deposit, and possibly up to 3 months of rental income.

My question is about doing something that is maybe in the gray area of mortgage applications. Essentially I'm wondering if I could sign a lease with my sister-in-law to show the bank as well as any necessary rental income from the sister-in-law, without her actually living there in reality. That would then help to reduce the debt that is calculated against us when applying for a second mortgage, and allowing us to get a larger mortgage (closer to what we would get if we actually just sold this condo). This would also make it much easier to move directly from our home into a new home. It would be hard to actually find real renters to move in because we wouldn't have anywhere to live. Then once we actually do move out of the condo and into the new home, I could look for actual renters for the condo.

I am really not worried about getting stuck with two mortgages that we can't afford. With the Bay Area housing market, if we wanted to sell our current condo, it would be pretty easy to do. If we can't find any good renters, then it would be relatively easy to sell the condo. The main bottle neck is getting a bank to count rental income against the primary mortgage on the condo so we could qualify for the 2nd mortgage.

If this isn't achievable or is maybe too shady, then we'd probably just need to sell the condo first.

Appreciate any thoughts!

submitted by /u/brainlesswierdo
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source https://www.reddit.com/r/RealEstate/comments/kmr85q/renting_current_home_and_buying_a_second_home/
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