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If a loan is written and rental income has been entered on the application to use for qualifying, but there is zero documentation of rent that is 'supposed' to be coming in, will this pass the underwriting test? No prior rentals, no rental/lease agreement, etc. No, I am not planning on doing this, just curious. Curious like, if someone I knew had done it.....
No, everything must be verified and proved. If rental income could be counted without verification, don't you think everyone would do it to make their DTI look better?
Thank you. If someone bought a rental property, but had no tenant lined up, no other rental ownership history, no way to prove how much the property would rent for after closing, would that prove problematic for underwriting if they wanted to use rental income as a source of income on the loan? I know this sounds lame.
The rental income would not count as there is no history of it. The buyer would have to prove that their own income could sustain the mortgage payment.
If a loan is written and rental income has been entered on the application to use for qualifying, but there is zero documentation of rent that is 'supposed' to be coming in, will this pass the underwriting test? No prior rentals, no rental/lease agreement, etc. No, I am not planning on doing this, just curious. Curious like, if someone I knew had done it.....
Yes, there are a couple ways to do this illegitimately, but to share would be nothing more than a road map to commit fraud. Believe it or not, so-called friends and coworkers are the #1 way unprofessional fraudsters are turned in. People that beat the system tend to brag about their cunning (typically when drinking), and some of those in an earshot have been turned away and unable to complete their transaction get mad and turn them in.
I am not saying this is how your friend made it to closing, because there are certainly other ways - such as portfolio products. I've worked for two banks (and now a 3rd) that have guidelines to carry a home without equity or to do so with a high back ratio.
It was very common a few years ago. Now it is not very common but still happens.
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