Future Rental Income to Help DTI

[Jay Hughes]

Hi,

I’ve been lurking/reading on the forum for a while and just decided to join. It’s been a really great resource, but it’s hard to get a handle on the current climate in lending.

My main question is the possibility of using future potential rental income to help qualify. There seems to be different information depending on which post I read.

Here are some details…

My wife and I are in our early 50’s and are hoping to retire in the next 6 to 7 years. We currently have a house in the Los Angeles area but want to buy a second home in the Palm Desert/La Quinta area. We would rent out the new place and bust our hump to pay it off or come close to paying off the new mortgage over the next several years. After that, we’d move to the new place and rent out or sell our current house.

In our current SFH home, we owe about $510,000 @ 2.65%. Seems to be worth around $900K maybe a little more.

Our DTI is around 24%. We have some other loans (Car/Student loan etc) that total around $25K. All the interest rates are less than 2.75%.

We both have excellent credit.

We want to buy a SFH in the 500K to 600K range.

We’re near the point of having enough for a 20% down. We’d have enough cash within a year or so for the entire down payment. In the meantime, we’re willing to use some equity in our current place or use a 401K loan if the right place came along.

We realize that the potential place that would buy would not be cash flow positive at first, be we’re in it long term.

Without any help from a renter calculated in and if we were able to purchase a new property, it seems like our DTI would be pushed up to around 50%.

Is something like this even feasible? Is it just a matter of reaching out to a bunch of lenders until we find one that will work with us? We are not in any hurry to make a move if it means stretching ourselves too thin, but we did want to see what the possibilities are.

As far as future rental income to help with DTI, we obviously don't have a new property lined up to buy let alone a renter in place.

I’ve read about being able to use 75% of rental income, but there seem to be differing ideas on whether or not there needs to be a rental agreement in place or not.

I realize we are not the typical forums posters as acquiring one property in 5-7 years is not that common of a goal here. However, we’re a little older and thus a little more risk-averse.

Sorry for the lengthy post and thanks in advance for any help that might be provided.