Using future rental income to finance Duplex

[Derrick Dill]

I'm a first-time home buyer from Southern California interested in buying a duplex. I'm a registered nurse a year fresh out of college and I want to buy a duplex with intent living in one and renting out the other.

I was pre-approved by a lender for 275,000$. In my area, the lowest for a duplex (in a reasonable area) is 350,000$. I was looking to find a lender who can use my future rental income or 75% of rental income to give me that extra little boost to make my dreams reality. 

Can anyone point me in the right direction or give me some tips?

Thanks ahead of time,

-Derrick

[Mark B.]

Lenders are more willing to count the income if you have a signed lease (1 year) for the other unit. You can have a contingent lease with the tenant, i.e. the lease depends on you closing on the property.

When they do the math they are going to want to see at least two months of reserves for the payment after you close still in your account, though in reality you want more for when something goes wrong (and it will).

[Darren Budahn]

@Derrick Dill

Are you looking at doing an FHA loan? If so, you may be able to buy with only 3.5% down.

Most conventional lenders are going to want to see 2 years of rental income on your tax returns to start counting the rental income in your favor.

You could try a local portfolio lender who may be more lenient and will count the income from the duplex right away.  Not sure how feasible that is. 

[Derrick Dill]

@Darren Budahn

Yeah, I'm looking to do an FHA loan with 3.5% down. Thanks for your insight

[Jerry Padilla]

@Derrick Dill

You can purchase a duplex and count 85% of the rental income right away, with an FHA mortgage and an investor friendly lender.

[Tyler Polanco]

@Jerry Padilla - Hey Jerry - I know this form is quite old, but I have a question for you. I am looking at doing a FHA Construction loan to build a 4 plex. Can you still qualify the future income toward the loan amount?

[Jerry Padilla]

@Tyler Polanco

They will look at the potential for future income. 10% down is required for any construction loan. You can do the end loan with FHA. FHA Construction is not a loan, I or any other lenders that I am aware of are able to offer.