Any advice on a mortgage lender in Florida who will allow rents as part of the qualifying process?

Question

Hello,I am interested in investing in the Jacksonville or Daytona Beach areas. This is my first post on this site, although I have listened to all the podcasts and been cruising the site for a while. I am a new investor with no prior landlording experience, looking to get pre-approved for a 250K purchase price, with 25% down. I have an 800 credit score, excellent employment income, and excellent cash reserves. I could purchase the property cash, but I would prefer to leverage my money with these low interest rates. The problem I am having is that most lenders will not allow any income from rents for the first two years, due the fact that I have not been a prior landlord. Without allowing for rents, and at that purchase price, my debt to income ratio (due to 1800 / mo. alimony payments which will stop in three years) is 48%. I had met a person, who I now consider a friend, in Portland who would have been able to pre-approve me using rents, but the Portland market doesn't cash flow and he cannot lend out of state. I'm going to ask a realtor I have been in contact with, but I figured I would ask here as well and get your advice.Any advice would be apprciated would help. Thanks,Ty

Shaun Weekes · Answer

Hello Ty,It's good that you found someone. The 2 year rule is an overlay with most lenders as Fannie Mae doesn't care if you have landlord experience. Now if you were using Freddie Mac as the investor it would be a different story as they require 2 years of landlord experience. As long as you get an Approve Eligible on DU ( Desktop Underwriter ) you should be golden and good to go. Good luck and take care.

Ty Whitman · Answer

Hi Jon,I've heard you on the podcast as well as read many of your posts here, and I always enjoy your input. I have massive respect for Bigger Pockets and did not intend to cross any lines (especially with my first post.. lol). I have learned soooo much from the podcasts and this site, and really appreciate everything. After writing my post, and then seeing the popup that inquiries about specific requests should be in the marketplace, I thought about my post and figured that even without specific info in any reply, any generalities about the topic would be very helpful (as in Eric's reply). I also thought that if I were having this problem, others might be as well, and so I decided to post it, additionally, because I thought it could also be a helpful topic to any other readers. That is why I wrote my follow up post with what I learned from this experience. The initial lender I was talking to did not want to loan with anything greater than a 43% debt to income ratio. Having said that, and along your lines, the guy I ended up going with said that I should qualify even without using the rental incomes, and with them it was a no brainer. He also said that with the market picking back up, a lot of loan agents are hopping back into the business, and so there are a ton of new lenders out there right now.

Jon Holdman · Answer

@Ty Whitman if you're looking for a specific lender you will need to post in the Marketplace.A 48% DTI should be low enough to qualify for an investor loan, at least for some lenders.

Ty Whitman · Answer

Eric, Thank you for your reply and for the advice. I ended up being referred to a mortgage broker who pre-approved me using rents by calling my realtor. They do a market rent analysis when the appraisal is done and apply 75% of gross rent to income. I told him it seemed great to me since I calculate deals using 50%. lol My advice to others reading this based on my experience today is... Choose who you work with wisely (especially if you are out of the area). If you are using a realtor, make sure you use a very competent realtor who is an investor him or herself. This could have been a big pain for me, but I was able to find a connection with one quick phone call.

Eric Black · Answer

Hello Ty,Welcome to investing and congrats on getting involved on BP!Most conventional lenders are going to have this 2-year rule. My advice would be to start calling local banks, both in the area you live as well as the area where you'll be investing to see if any of them do not have this requirement. Many portfolio lenders (i.e. small local banks) have less restrictions than the big banks.Don't get frustrated if the first 2, 3 or 10 tell you no. Keep calling until you find one that will.Otherwise your only other option may be to pay cash for the property and then do what's called "delayed financing" which will allow you to refinance the house without having to wait the typical 1-year before you can refi. True, it might not be for the full 75-80% but at least you could get a good chunk of your cash back.Best of luck!Eric