Local bank won't accept rental income until its filed on my taxes.

[Ben Freeman]

I was trying to be pre-approved for a new primary and ran into some issues with the lender not wanting to count my income on my duplex. 

Backstory:

I purchased a duplex in may of 2022. One half was rented($1300) the other was vacant. I completely gutted the vacant half and made it into 6 bedrooms to be rented to young professionals. This reno took the remainder of 2022 and into the early part of 2023. I started to fill room in the vacant side April of 2023.  I have since filled all 6 rooms,(two will be transitioning and refilled this month) total revenue for the 6 rooms is $6325. Total income for this property is $5625. 

My lender locally will only look at the $1300 since it was on my tax return. I have signed leases with most being 12 months. How can I get a lender to count the rest of the income to not mess with my debt to income?

Thanks for any help you can provide!

Ben

[Patricia Steiner]

In most cases, "If the renter has a tenant, lenders will take a percentage of the income that's outlined on a lease and use that to determine projected rental income. They usually use 75% of your total reported income — 25% is subtracted to account for potential vacancies and ongoing maintenance."  (End)  One year leases are generally the requirement.  

In your case, it may be that you are renting rooms - versus a property.  Can you prove the income through bank deposits/statements?  I would gather evidence of income and approach the lender again - as well as others.

Hope this helps.