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Old 09-12-2011, 08:12 AM
8,406 posts, read 6,893,407 times
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I plan to buy a home in the next 2 years. I also have a rental that I may want to keep.

I have income from VA benefits (nontaxable), child support and a surplus income from my rental. How are these incomes taken into consideration when applying for a mortgage? What documents are need since I don't get paystubs?

Also I would like to refi my rental during the same time I plan to buy because I have a interest only loan which adjusts every 6 months. The interest has been at 2.75% for the past year but interest rate will rise within 2 years. Which mortgage should I handle first, refi or buy?

I plan to use my VA loan for one but I don't know which mortgage would be best. Do rental refi's have higher interest rates? I have a good credit score in the 800's.
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Old 09-13-2011, 05:42 AM
Location: Heart of Dixie
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Yes, they do have higher refi rates, least that is my experience. You will have to have proof of your income. Im just into my fourth week, of cashing out a rental, and my credit is excellent as well, you can prove your income of child Support by your divorce papers, or court ordered papers.

Your reserve is important as well, you have to have 3 months(at least) of income in savings..many, many hoops to jump thru...just be ready to dish out any and all information.
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Old 09-13-2011, 10:16 AM
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Rental income is verified by two years tax returns. Personally, I would refinance that first. Then purchase, but close after the refi. I say that because the tax returns would be based on the prior years' taxes, not the new payment.

VA income is documented by a form the VA completes for the mortgage lender. The lender will also ask you for a copy of your disability award. (This is in case VA comes back with incorrect info, which happens all the time). You would also be exempt from the funding fee. (Even if you were to buy using conventional financing, these methods could still be used).

VA loans you cannot use income from a rental to qualify, you may only use it to offset the mortgage payment after the vacancy factor has been subtracted.

VA loans are only available for owner occupied properties. The exception would be if you had purchased the rental using your VA as an owner occupied home, and later turned it into a rental. But there is no way that rental could be a VA loan with an IO loan. Investor loans do run about 1/4% to 3/8% more than an owner occupied loan. Equity, credit scores, property type are all contributing factors to just how wide of a gap you will have between the two occupancy types.

As for the child support, it must continue for at least three years. If your child(ren) are 15, you need to pull out that copy of the support agreement and see what happens at age 18. You also must prove its been received like clockwork for the past year.
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Old 09-13-2011, 10:30 AM
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We're currently refi-ing both our rental and current homes - the rental bought 2yrs ago as our primary was at 5%, the current home bought 6mos ago was at 4.75%. Both will be fixed at 4.25%, 30 yr when the refi is done. When i called around for refi quotes - I didn't get price difference between the two ...

Both places were bought on VA loans (one mine, one my husbands). We didn't plan on moving but husbands job situation changed and we needed to move. We had to qualify for the new place using just our regular income (since we didn't have a tenent for more than a year) so rental income didn't factor in for us...
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