Insights on our lending situation for a primary residence coupled with our rentals...

Mortgage Broker · CA · Member since 2014 · 1k+ posts · 642 votes

2y

For rentals not yet showing on your tax returns (like your Nevada property), many lenders will use 75% of the monthly rent to offset your PITI. You may need to show receipt of a few months rent along with the lease. If it's a very new lease, you'd provide copies of the security deposit and first month's rent with proof of deposit.

For rental income reported on your schedule E, a different calculation will be used.

Your current primary residence can also be converted to a rental. You will need a signed lease and first month's rent and security deposit, but you should be able to use 75% of the monthly rent.

While some lenders could have stricter guidelines when it comes to length of rental income history, these are the standard conventional guidelines that most lenders follow.

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Stephanie Medellin, Loan Factory58 Reviews

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William C.

OP

Member since 2021 · 87 posts · 41 votes

2y

Quote from @Stephanie Medellin:

@William C.

For rentals not yet showing on your tax returns (like your Nevada property), many lenders will use 75% of the monthly rent to offset your PITI. You may need to show receipt of a few months rent along with the lease. If it's a very new lease, you'd provide copies of the security deposit and first month's rent with proof of deposit.

For rental income reported on your schedule E, a different calculation will be used.

Your current primary residence can also be converted to a rental. You will need a signed lease and first month's rent and security deposit, but you should be able to use 75% of the monthly rent.

While some lenders could have stricter guidelines when it comes to length of rental income history, these are the standard conventional guidelines that most lenders follow.

I appreciate that reply. The 75% rule was what I was expecting as well. It is what lenders had traditionally done for us in similar situations. For some reason this go round was different. Possibly just one off with this specific lender and I need to try to go to someone else.

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Chris Watkins

Lender · Eugene, OR · Member since 2021 · 245 posts · 154 votes

2y

Nathaniel,

I agree with Stephanie that you should be able to use 75% of the amount on the lease to offset the PITI, the state it's in doesn't matter. Working with an investor-friendly lender will make a lot of difference. Are you looking to stay in Eugene? I'm in Eugene and would be happy to talk about your situation.

Chris

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Brayden Hrycko

Lender · Allentown, PA · Member since 2023 · 207 posts · 38 votes

2y

Hey @William C.,

I agree with the others. 75% rule should be given. I would be happy to look deeper into your scenario as well. Feel free to reach out.

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Corby GoadeBusiness Member

Investor · Boise, ID · Member since 2014 · 3k+ posts · 3k+ votes

2y

Quote from @William C.:

Summary: We have a small portfolio of SFH rentals. We are looking into acquiring a new PRIMARY residence. We would then turn our current home into a rental (again). We have only approached 1 lender (large, online only lender), but had issues getting them to understand our total situation so the amount they would lend to us was insufficient. Because 1 of our rentals (the Nevada one) is newer and does not appear on our past Schedule C, they chose not to recognize any of the income from that property. Even though we have a history of rental income at that property and a 2yr lease in place. Details below on our properties and our financial situation. Any similar experiences out there and/or approaches we should consider to get a lender that can understand the full scope?

Our current portfolio:

-Florida SFH: Mortgage (includes HOA and PM company) = $2100. Long-term tenant with signed lease. Rent = $2800.

-Nevada SFH: Mortgage (no HOA or PM company) = $3300. Long-term tenant with signed lease. Rent = $3300.

-Oregon SFH: Current primary residence. Mortgage = $1700. Previous recent history as a long-term rental where rental income was $2700.

Financial Snapshot: Both adults have solid W-2 jobs. Long track record of employment. Gross yearly income combined of $210,000. Outside of the mortgages, we have zero debts.

Home Search: Price range of $900,000. Would be putting 20% down ($180,000). We have that cash on hand and a cushion. So loan size would be around $720,000. No purchase is imminent, so no time crunch. We just want to be ready if the right home becomes available to us.

There's really not enough info here for a direct answer, BUT lenders counting income from rentals is an overlay, not a regulation. Lenders who don't or won't count your income will tell you that no one will, but that's not necessarily true. Just keep shopping around.

For a direct answer, we need to know more about your income and liabilities- you'll still need to hit sub 45% DTI to get a conventional loan, regardless of your equity position or cash flow.

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Jacob Sherman

12 Penns Trail Suite 138 Newtown, PA 18940 · Member since 2023 · 1k+ posts · 319 votes

2y

Are you self employed ?

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William C.

OP

Member since 2021 · 87 posts · 41 votes

2y

Quote from @Corby Goade:

Quote from @William C.:

Summary: We have a small portfolio of SFH rentals. We are looking into acquiring a new PRIMARY residence. We would then turn our current home into a rental (again). We have only approached 1 lender (large, online only lender), but had issues getting them to understand our total situation so the amount they would lend to us was insufficient. Because 1 of our rentals (the Nevada one) is newer and does not appear on our past Schedule C, they chose not to recognize any of the income from that property. Even though we have a history of rental income at that property and a 2yr lease in place. Details below on our properties and our financial situation. Any similar experiences out there and/or approaches we should consider to get a lender that can understand the full scope?

Our current portfolio:

-Florida SFH: Mortgage (includes HOA and PM company) = $2100. Long-term tenant with signed lease. Rent = $2800.

-Nevada SFH: Mortgage (no HOA or PM company) = $3300. Long-term tenant with signed lease. Rent = $3300.

-Oregon SFH: Current primary residence. Mortgage = $1700. Previous recent history as a long-term rental where rental income was $2700.

Financial Snapshot: Both adults have solid W-2 jobs. Long track record of employment. Gross yearly income combined of $210,000. Outside of the mortgages, we have zero debts.

Home Search: Price range of $900,000. Would be putting 20% down ($180,000). We have that cash on hand and a cushion. So loan size would be around $720,000. No purchase is imminent, so no time crunch. We just want to be ready if the right home becomes available to us.

There's really not enough info here for a direct answer, BUT lenders counting income from rentals is an overlay, not a regulation. Lenders who don't or won't count your income will tell you that no one will, but that's not necessarily true. Just keep shopping around.

For a direct answer, we need to know more about your income and liabilities- you'll still need to hit sub 45% DTI to get a conventional loan, regardless of your equity position or cash flow.

Let me know what info would be helpful. If it’s info that I can put on a public forum, I will give it a try. I tried my best to provide context, but I’m sure I missed some.

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William C.

OP

Member since 2021 · 87 posts · 41 votes

2y

Quote from @Jacob Sherman:

Are you self employed ?

Not self employed. Either is my spouse. Both are W-2 employees.

0 Reply

Jacob Sherman

12 Penns Trail Suite 138 Newtown, PA 18940 · Member since 2023 · 1k+ posts · 319 votes

2y

Quote from @William C.:

Quote from @Jacob Sherman:

Are you self employed ?

Not self employed. Either is my spouse. Both are W-2 employees.

There could be options depending on what the ratios look like with expanded dti guidelines

0 Reply

Chris Watkins

Lender · Eugene, OR · Member since 2021 · 245 posts · 154 votes

2y

Quote from @William C.:

Quote from @Corby Goade:

Quote from @William C.:

Summary: We have a small portfolio of SFH rentals. We are looking into acquiring a new PRIMARY residence. We would then turn our current home into a rental (again). We have only approached 1 lender (large, online only lender), but had issues getting them to understand our total situation so the amount they would lend to us was insufficient. Because 1 of our rentals (the Nevada one) is newer and does not appear on our past Schedule C, they chose not to recognize any of the income from that property. Even though we have a history of rental income at that property and a 2yr lease in place. Details below on our properties and our financial situation. Any similar experiences out there and/or approaches we should consider to get a lender that can understand the full scope?

Our current portfolio:

-Florida SFH: Mortgage (includes HOA and PM company) = $2100. Long-term tenant with signed lease. Rent = $2800.

-Nevada SFH: Mortgage (no HOA or PM company) = $3300. Long-term tenant with signed lease. Rent = $3300.

-Oregon SFH: Current primary residence. Mortgage = $1700. Previous recent history as a long-term rental where rental income was $2700.

Financial Snapshot: Both adults have solid W-2 jobs. Long track record of employment. Gross yearly income combined of $210,000. Outside of the mortgages, we have zero debts.

Home Search: Price range of $900,000. Would be putting 20% down ($180,000). We have that cash on hand and a cushion. So loan size would be around $720,000. No purchase is imminent, so no time crunch. We just want to be ready if the right home becomes available to us.

There's really not enough info here for a direct answer, BUT lenders counting income from rentals is an overlay, not a regulation. Lenders who don't or won't count your income will tell you that no one will, but that's not necessarily true. Just keep shopping around.

For a direct answer, we need to know more about your income and liabilities- you'll still need to hit sub 45% DTI to get a conventional loan, regardless of your equity position or cash flow.

Let me know what info would be helpful. If it’s info that I can put on a public forum, I will give it a try. I tried my best to provide context, but I’m sure I missed some.

Based on these rough numbers and assuming that a market rental appraisal would back up your stated income, you're looking at a DTI of ~44% at today's generic rates. We qualify up to 50% DTI for conventional loans, so it seems that you'd have room to meet our criteria. You'd have a payment of around $5500/mo, so you'd have to make sure that fits in your budget.

We'd have to dive more into credit and rental history to be sure, but I don't see why you couldn't qualify. DM me if you want to dive deeper or get pre-approved.

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Insights on our lending situation for a primary residence coupled with our rentals...

Insights on our lending situation for a primary residence coupled with our rentals...

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