I wanted to give some additional info on rental of current home if the borrower was going to go with an FHA loan for their next loan and additionally for conventional financing, IF the 30% equity cannot be documented:
FHA: Cannot use any rental income unless it has been rented for over 12 months and is on the tax returns. (home being vacated cannot be an FHA loan and get a new FHA loan)
CON: Need to show proof of 30% equity with AVM or exterior only appraisal, proof security deposit has been deposited and lease agreement. If the 30% equity CAN NOT be documented- you need to have 6 months PITI for BOTH properties. 75% of the rental amount can be used.