Experience with seasoning on rental income (Fannie Mae Guidelines)

[Paul S.]

Has anyone had any experience with getting around the seasoning requirements for rental income? With the properties we own, all of which are financed, we have reached our max debt to income ratio. From what we understand, the banks will not allow us to count the rental income until we have owned the properties for 2 years each (shown by tax returns). All of our houses are cash flowing and we want to work with a bank who will qualify us based on our experience, not these arbitrary rules. At this point, we are limited not by the number of houses, but by the amount of debt we can carry. Any thoughts would be appreciated. We are in the Charlotte NC market so if anyone has any local knowledge and/or experience, it would be much appreciated.

[Shaun Weekes]

Hello Paul,

Fannie doesn't have a two year rule on rental income. 

If your shedule E is showing a loss it will hurt your DTI and if it's showing possitive it will help you depending on your schedule E calculations ( How the UW calculates the income ) If you have a wage earner job and say for example that you're making 48K a year. That's 4k a month but say your schedule E after income calculations is showing -750. You're making $3,250.00, so you could be cash flowing but if you're claiming losses it could really hurt you. I've seen this on a lot of 1040's. So look over your 1040's and see what they look like. If you see a - besideschedule E on page 1 of your 1040's it could be the issue. If you're mortgage payment is high after schedule E calculations you still could be in trouble. I will contact you to explain this further as rental income has so many variables.

I hope this helps.