Sign the lease on the house I'm leaving before I apply for the next mortgage, or apply first and let the timing sort itself out?

Order A with one change. Sign the lease with a start date two weeks after your target closing on the new house, not the same week. I've watched three of these turn into hotel weeks because a closing moved four days and the tenant's movers didn't care. Two weeks of vacancy costs about 900 in your rent range and buys you the ability to be a person during the move.

45 seems close to the edge already. Does the lease offset actually move it enough, or are you optimizing the wrong number?

@rigging that's my question too. If a documented lease takes 45 down to 41 and the ceiling is 45ish depending on the program, then the lease is the whole approval and order B isn't really available to you. If it takes you to 43, you were fine either way and you should pick the order that's less stressful.

The mechanism you're asking about has two separate parts, and mixing them is where these threads go wrong.

First, how rental income gets counted. Underwriters generally apply only a portion of gross rent, commonly 75 percent, to offset the payment on a property you're converting, on the theory that vacancy and repairs consume the rest. The documentation they'll accept for that rent varies. Some programs allow a market rent figure from an appraiser's rent schedule when the property has no rental history, others want an executed lease plus evidence the deposit or first month cleared your account. Agency guidelines set a floor and individual lenders add overlays on top, so two lenders quoting the same program can genuinely give you different answers. Get the documentation requirement and the offset percentage from the underwriter in writing before you commit to a tenant.

Second, your ratio math. At 45 with the full departing payment counted, the question is how much of that payment the offset erases. If the departing house's payment is 1,400 and 75 percent of a 1,900 lease is 1,425, the payment can be fully covered and the ratio effect is large. If rent is 1,500, the offset covers 1,125 and you still carry 275 a month. Run both versions with your actual income before you decide which order matters.

On intent, applying for owner-occupant financing while marketing your current home for rent is a normal pattern in this strategy, and what matters is that your stated intent to occupy the new property is true and your file says the same thing everywhere. If you have any doubt about how your specific facts read, that's a conversation with your loan officer's compliance side or an attorney, not a forum.

The 75 percent number is the part I'd have gotten wrong. I'd been assuming full rent counted, which makes the whole ladder look easier than it is.

@rena-expert's second example is @quarry's actual problem. If 75 percent of your achievable rent doesn't cover the departing payment, no ordering trick fixes it and you're carrying the difference into the next application every single time you do this. Which means the number that decides whether rung four exists isn't the lease timing, it's whether each converted house rents for roughly 1.35 times its payment. @quarry, what's the ratio on the house you're leaving?