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i currently own and live in a town home and would like to purchase a larger home with land and rent the town home. i have the income but i am concerned about how the townhome will be considered in my debt to income ratio. what do i need to do to pull this off considering the scenario below?
example:
current town home worth: $200k
current town home possible monthly rent: $1500
monthly mortgage payment: $1000
(keeping the numbers small and simple)
assume i have at least 20% equity in the town home
finding a renter is really easy
i want to buy a new home worth: $350k ~
all the online calculators show i would easily be approved for the $350k (all show a lot more). will the bank require a contract from renters before they consider the income from the townhome?
Most lenders will require 12 month's of rental income history before they'll exclude it from your debt to income ratios, so it will more than likely be included in your debts since you have no history of renting it.
Most lenders will require 12 month's of rental income history before they'll exclude it from your debt to income ratios, so it will more than likely be included in your debts since you have no history of renting it.
AND the tax returns to show that you reported that rental income to IRS.
I am by no means an expert, but I can share our situation, which is similar.
We are soon to close on our new house and plan to rent our current home. We were able to count 75% of the projected rental income and we were required to have a signed lease before we could schedule closing. (We waited until we had financing approval contingent upon a signed lease prior to advertising/renting).
I should add that we have a vacation rental as well, so our experience with renting may have affected our approval, not sure.
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