Converting primary to rental. DTI questions

[Bob Daniels]

I recently moved to a new state and am converting what was my primary residence into a rental.  I am set to close on a new primary residence however my underwriter is insisting that my debt to income level is too high because of the mortgage on the old primary home.  They refuse to acknowledge any potential rental income from the conversion of this former primary home unless I am able to provide them a signed lease agreement with a tenant already in place.  They will not accept an estimated monthly rent amount that was provided by my property management company.  The former primary needed some minor repairs such as carpet/fence repair and due to those repairs that home will likely not be rented by the time I am supposed to close on my new primary.

Is it true that Fannie Mae guidelines prohibit using projected rental income even if there is already a signed agreement with a property management company that shows a clear intent to rent that home? Not taking some sort of percentage of estimated future revenue doesn't make any sense. It would seem to me that just about anyone's DTI would be extremely high if they were calculating the debt as two mortgages and not having any rental income to offset that second mortgage until a signed lease is in place. Any help is greatly appreciated.

[Jay Hurst]

Quote from @Bob Daniels:

I recently moved to a new state and am converting what was my primary residence into a rental.  I am set to close on a new primary residence however my underwriter is insisting that my debt to income level is too high because of the mortgage on the old primary home.  They refuse to acknowledge any potential rental income from the conversion of this former primary home unless I am able to provide them a signed lease agreement with a tenant already in place.  They will not accept an estimated monthly rent amount that was provided by my property management company.  The former primary needed some minor repairs such as carpet/fence repair and due to those repairs that home will likely not be rented by the time I am supposed to close on my new primary.

Is it true that Fannie Mae guidelines prohibit using projected rental income even if there is already a signed agreement with a property management company that shows a clear intent to rent that home? Not taking some sort of percentage of estimated future revenue doesn't make any sense. It would seem to me that just about anyone's DTI would be extremely high if they were calculating the debt as two mortgages and not having any rental income to offset that second mortgage until a signed lease is in place. Any help is greatly appreciated.

 @Bob Daniels   Very sorry that your LO did not inform you of this as they very much should have if you needed the income from your departing residence to qualify.  That is LO 101. Yes, Fannie/Freddie require that you have a lease in place, and then will use 75% of the income to offset your current mortgage.  (there used to be more documentation required as well as proof you had at least 25% equity in the departing residence but no more)   Again, you should have been told this from day one. We do not lend in AZ or NC, but we have a bridge program to help folks with the timing of these transactions. 

And to add, the suggestion above would not work as a DSCR loan does not magically take away the debt even if it is not reported on a credit report.