Home Purchase/Upgrade Question

There are several options open to you; however, none of them will be simple. It may take some time and considerable documentation on both your part and your chosen mortgage professional. Certainly, you do not want to start looking for a new property until your current situaion is resolved.First, let me explan what will NOT work. It will not work for you to short sale your current residence so you can buy another. Some lenders MIGHT consider providing you new financing if your have perfect credit (except the short sale) and if you were never late on your current mortgage. The odds of getting your current lender to agree to a short sale without duress on your part is pretty slim (i.e., save yourself the energy).1). As uncomfortable as it may sound, you could sell and bring cash to the table to close. (Probably not your preferred option, but it IS an option).2). You could try to buy and retain your current residence as a rental (I noted that you already considered that, but there is more to the consideration). One, it sounds like you may be "underwater" on the monthly rent payment, which means you are going to have additional out of pocket expenses besides the new home. Add to that: As a lender, we are going to either 1). assume a 25% vacancy factor in the rental payment (2000 rent X 25% = 400...which means the lender would allow you $1600 credit against your $2200 payment or 2). This is FAR more likely, the lender will not allow any rent credit on your existing property becauase you have no equity in it. Therefore, you must qualify for both mortgage payments. You will need six months PITI reserves in either situation.3). Is your home is a location that you enjoy? Is a remodel and additional space possible? If the numbers work on an "After Improved" value, you could consider a 203K FHA renovation refinance to bring your current property up to the standard that you and your family would enjoy.