Caveat: I am not very financially savvy so keep that in mind as you read further. Thanks!

My wife and I are both self-employed, our home is paid off, we have \~$200k in retirement savings, but we show very little income on taxes ... \~$40k AGI between the two of us. Our home is in a booming part of a booming city (Raleigh) and we could likely sell it for \~$600k. Maybe more, I don't really know. One thing we've talked about is selling the house and buying a much cheaper house (in the 300k range) in a smaller town and banking as much cash as possible for savings.We have stumbled across what may be our dream house up in the mountains but it doesn't fall in the 300k range. Asking price is $500k. I guess our options would be to get a bridge loan (or whatever it is) to buy the new house then pay it off when current house sells or get a whole new mortgage and rent our current house out. We can very easily split the house in 2 to kinda be a duplex) or could rent the whole thing. Either way I think we could get \~$3k/month. If we went with the rental option the rent $$ would be paying the new mortgage and my question is what would the bank need from us to prove that? A signed lease? A signed agreement with a property management company?

I'll take any and all advice. Thanks and happy new year!  


edit: if this isn't enough info to answer the questions please let me know and I'll fill in whatever I can. 
Based on your situation and the options you're considering, here are a few thoughts:

1. Selling your current home and buying a cheaper one: This could be a good strategy to increase your savings, especially if you can find a desirable, less expensive home in a smaller town. However, you'd need to consider the costs of moving, including potential higher living costs in the new area, and the emotional impact of leaving your current city and home.

2. Buying the dream house in the mountains: If you can afford it, this option could offer a great lifestyle change. However, it's a more expensive choice and would involve taking on new debt. Banks can be hesitant to lend to self-employed individuals with low reported income, despite significant assets. Also, consider the upkeep costs, potential isolation, and changes in lifestyle living in the mountains might bring.

3. Renting out your current home: Rental income can be a good source of steady income, but being a landlord isn't for everyone and comes with its own costs and responsibilities. If you choose this route and want to use this income to qualify for a mortgage, lenders typically want to see a history of rental income on your tax returns to count it. A signed lease might be considered, but lenders will usually want to see at least one, if not two years of steady rental income. Additionally, the rental income will need to cover the mortgage payment, taxes, insurance, and any property management fees and still provide a reasonable return.

In any case, it's recommended to speak with a financial advisor or a mortgage lender who can review your complete financial picture and provide customized advice. They can help you understand your borrowing capacity, the potential tax implications of each option, and the overall impact on your financial goals. 

Remember, while it's important to think about the financial aspects, it's also crucial to consider what will make you and your wife happiest in the long term.
### Human
Caveat: I am not very financially savvy so keep that in mind as you read further. Thanks!

My wife and I are both self-employed, our home is paid off, we have \~$200k in retirement savings, but we show very little income on taxes ... \~$40k AGI between the two of us. Our home is in a booming part of a booming city (Raleigh) and we could likely sell it for \~$600k. Maybe more, I don't really know. One thing we've talked about is selling the house and buying a much cheaper house (in the 300k range) in a smaller town and banking as much cash as possible for savings.We have stumbled across what may be our dream house up in the mountains but it doesn't fall in the 300k range. Asking price is $500k. I guess our options would be to get a bridge loan (or whatever it is) to buy the new house then pay it off when current house sells or get a whole new mortgage and rent our current house out. We can very easily split the house in 2 to kinda be a duplex) or could rent the whole thing. Either way I think we could get \~$3k/month. If we went with the rental option the rent $$ would be paying the new mortgage and my question is what would the bank need from us to prove that? A signed lease? A signed agreement with a property management company?

I'll take any and all advice. Thanks and happy new year!  


edit: if this isn't enough info to answer the questions please let me know and I'll fill in whatever I can. 

### Assistant
Based on your situation and the options you're considering, here are a few thoughts:

1. Selling your current home and buying a cheaper one: This could be a good strategy to increase your savings, especially if you can find a desirable, less expensive home in a smaller town. However, you'd need to consider the costs of moving, including potential higher living costs in the new area, and the emotional impact of leaving your current city and home.

2. Buying the dream house in the mountains: If you can afford it, this option could offer a great lifestyle change. However, it's a more expensive choice and would involve taking on new debt. Banks can be hesitant to lend to self-employed individuals with low reported income, despite significant assets. Also, consider the upkeep costs, potential isolation, and changes in lifestyle living in the mountains might bring.

3. Renting out your current home: Rental income can be a good source of steady income, but being a landlord isn't for everyone and comes with its own costs and responsibilities. If you choose this route and want to use this income to qualify for a mortgage, lenders typically want to see a history of rental income on your tax returns to count it. A signed lease might be considered, but lenders will usually want to see at least one, if not two years of steady rental income. Additionally, the rental income will need to cover the mortgage payment, taxes, insurance, and any property management fees and still provide a reasonable return.

In any case, it's recommended to speak with a financial advisor or a mortgage lender who can review your complete financial picture and provide customized advice. They can help you understand your borrowing capacity, the potential tax implications of each option, and the overall impact on your financial goals. 

Remember, while it's important to think about the financial aspects, it's also crucial to consider what will make you and your wife happiest in the long term.<eos_token>