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Old 07-24-2008, 11:26 AM
 
Location: Austin TX
959 posts, read 4,100,891 times
Reputation: 464

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We are working on preapproval and just discovered that we may not be able to do an FHA loan because our rental house is on a 6 month lease rather than a 12 month lease. We have no other debts but the mortgage is sizeable enough to mess with our debt to ratio given the price of the house we want to buy. Is there no hope for us while we have the current tenants? I will be so depressed if we have to rent for a year until we look more attractive to an FHA (or come up with 5% we don't currently have). Time urgent question so would appreciate any thoughts at all. Thank you
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Old 07-24-2008, 11:58 AM
 
Location: Austin TX
959 posts, read 4,100,891 times
Reputation: 464
Anyone anyone? We have all our ducks in a row except this last minute surprise. Are we destined to rent for a year and double move
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Old 07-24-2008, 12:14 PM
 
4,543 posts, read 11,547,065 times
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How many years has the investment property been on your tax returns?
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Old 07-24-2008, 12:18 PM
 
Location: central, between Pepe's Tacos and Roberto's
2,086 posts, read 6,098,079 times
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Although FHA does not necessarily stipulate how long a lease must be viable for, they do stipulate that you must be able to prove the stability of the income. If the lease agreement is for 6 months, but the renters have been in said property for 2 years than that may be acceptable. That being said, it may be a lender requirement.
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Old 07-24-2008, 12:22 PM
 
Location: Austin TX
959 posts, read 4,100,891 times
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The lease began July 1st We were the prior occupants so no rental history. And as far as debt to ratio, according to a nifty FHA calculator I found, we are 25k in house price above what would be allowed if our rental income were to not be counted.
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Old 07-24-2008, 12:26 PM
 
Location: Austin TX
959 posts, read 4,100,891 times
Reputation: 464
So the 6 month rental lease - FHA might be viable with some lenders but not others?
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Old 07-24-2008, 12:30 PM
 
3,583 posts, read 10,244,747 times
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Quote:
Originally Posted by Indigoblue View Post
The lease began July 1st We were the prior occupants so no rental history. And as far as debt to ratio, according to a nifty FHA calculator I found, we are 25k in house price above what would be allowed if our rental income were to not be counted.
Would your tenants be willing to lengthen the time on their lease?

I hate to say it but you may have a real problem. Most importantly speak with your lender/broker immediately and let them know what is going on! They know your situation and are in a better position to give you sound advise based on your particular variables. Good Luck!
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Old 07-24-2008, 01:00 PM
 
4,543 posts, read 11,547,065 times
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Quote:
Originally Posted by Indigoblue View Post
So the 6 month rental lease - FHA might be viable with some lenders but not others?
So you have no history of being a landlord and have minimal to put down on the new house...sounds pretty risky from a lending standpoint.
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Old 07-24-2008, 04:27 PM
 
Location: central, between Pepe's Tacos and Roberto's
2,086 posts, read 6,098,079 times
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Quote:
Originally Posted by TimtheGuy View Post
So you have no history of being a landlord and have minimal to put down on the new house...sounds pretty risky from a lending standpoint.
+1. A 12 month lease would alleviate some of that risk, but a 6 month lease does not reasonably prove any kind of stability for the rental income.
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Old 07-25-2008, 01:01 AM
 
Location: Cary, NC
1,036 posts, read 3,627,833 times
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As was recommended, asking on the forum is good... but you should call your lender ASAP.

The guidelines are not set in stone, its the risk level considering your credit, income, employment history, reserves, down payment and the rental that the system and underwriters will look at. Even a 12 month lease agreement could get denied if there are enough other risk factors.

This is why it is important to have good communication with your lender and work with someone that knows the questions to ask. This sort of thing might make no difference or it could be an item that derails the whole process.... call the lender ASAP and have them notify the underwriter so they can review it.
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