When do lenders count your rental income as income? (home loan, credit, rate)
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Hi All! I'm trying to figure out when do lenders begin to count your rental incomes as income when getting a mortgage on a house. To be more clear on what I am trying to ask, I have a home that I bought a few months ago with a mortgage and I would like to rent it out for $1,800. Let's say Home A. The mortgage on Home A is $1,500. I also have another home, Home B, with a mortgage of $1,600 that is for me to live in. I would like to buy another home, Home C, but I cannot afford another mortgage because I have two mortgages (Home A & B) totaling $3,100 and my gross income is $5,500, so my debt to income ratio is too high to get another mortgage.
So if there are any experienced renters out there or loan officers, I would like to know when would lenders begin counting Home A as rental income and not be counted against me as debt. Instead, I'd have a gross income of $5,800 ($300 additional profit from rental income) and only $1,600 debt. I've heard many things from lenders count 75% of the rental income as income after a couple of months to it takes at least two years of rental income history on the house before they consider it as rental income. By the way, I live in Dallas, Texas.
Any clarification and explanation would be greatly appreciated. Thank you guys in advanced.
The guidelines have really let up on the rental income to qualify. But a question or two for you, if you don't mind - when did you purchase Home A? We know Home B was a few months ago (or did I reverse them - it shouldn't matter for these question). When you bought Home A, did you obtain an owner occupied mortgage. How about Home B? And then Home C? Were they/will they all be obtained via owner occupied loans?
Don't set yourself up as a system abuser. Now if you had to take in mom and dad or step children, that's an easy explanation. But if it's just you or just you and your wife and you are on house #3 within a space of 18 months, well, that's a different story. Lender for house C may bite their tongue, but if it's another insured loan, chances are they will start asking questions. 20 years ago, I would have likely done the loan without one question. Today is another case - I would get ticked off if I put my time and energy into your loan, only for you to be labeled as a system abuser. Time is one of the few things I can control. Waste it, shame on me for not recognizing it up front.
If you did acquire one or more using an investor or 2nd Home loan or the homes were spaced 12 months apart, then you shouldn't have any issues.
...when do lenders begin to count your rental incomes as income when getting a mortgage
When the income (and expenses) from that first property show up on your 1040.
If you have great credit and credibility otherwise...
if you can demonstrate the income & expenses like with a separate account... maybe sooner.
But until you declare it... it's all hearsay.
When the income (and expenses) from that first property show up on your 1040.
If you have great credit and credibility otherwise...
if you can demonstrate the income & expenses like with a separate account... maybe sooner.
But until you declare it... it's all hearsay.
So it is sounding like each lender is slightly different from one another but the bottom line is that if you have an excecuted lease, deposit, and first months rent check and proof, you basically can use 75% of the monthly rent as income immediately depending on your credit and credibility? Otherwise, you'll need to provide more evidence of your competency in renting homes to compensate for your lack of credit and credibility?
Are you sure that the property must show up on your 1040 before they'd consider the monthly rent as income? If I was to buy a home and rent out say in January 2018, I'd have to wait over a year til about February 2019 to put it on my 1040 and claim taxes. Lenders would not consider any of the monthly rents as income from January 2018 to January 2019?
Quote:
Originally Posted by Pfhtex
You have to provide an executed Lease, deposit and first month's rent checks, and proof you deposited those funds.
You can use 75% of the monthly rent as income.
There is no longer a requirement that you have a history of owning rental properties (Schedule E) on prior tax returns.
This sounds about right what I've been hearing from multiple sources. May I ask if you are a loan officer or an experience landlord?
Quote:
Originally Posted by SmartMoney
The guidelines have really let up on the rental income to qualify. But a question or two for you, if you don't mind
I've bought my first home in Dallas in 2012 and still living there. I've bought a second home last December in Plano for my dad to live in but he got laid off again, so he's moving back in with me and I just recently rented that house for $1,800. It was extremely easy to rent out and had two people fighting over to get the home. Since it was so easy to rent out and I still have a lot of cash, I'd like to try to buy another home to rent out but can't afford another loan after the second home.
Phxtex and Smart Money are both loan officers that regularly offer a lot of great advice on this forum. You might do very well to contact them by DM to see if they do loans in your state.
Lenders are different. A local portfolio lender in my area will count 75% of an appraisers rental survey as income on the departing residence. Guidelines are aways changing. At one point you needed a certain amount of equity in the rental properties, that has changed for certain loans.
If you're buying it for the express purpose of renting it out, the appraisal will be different & will include an estimated rent. My credit union requires 25% down to get the best rate & they used 80% of the appraisals estimated rent to cover the payment.
If you're buying it for the express purpose of renting it out, the appraisal will be different & will include an estimated rent. My credit union requires 25% down to get the best rate & they used 80% of the appraisals estimated rent to cover the payment.
^^^
this
Last rental I purchased, lender only accepted other rental income only if I show 12 months of rent payments. For the purchase, they will run appraisal along with market comps for rental. Their comps for rental was about $300 less than what I ended up as rent. They will be on the conservative side as expected.
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