Question about qualifying ratios and procedure

[Rod Cordsen]

I am trying to understand the procedure for qualifying income ratios for Fannie mortgages. Investor or owner occupied.

How do they count rental income from new purchase?  I understand for existing rental properties they use tax returns to verify that rental income.  

Senerio. 

I just sold my home and I am wanting to house hack for a few years to build properties for long term hold. I will build new construction fourplexes and sell some to raise capital but plan to finance and own long term as many as I can qualify for.

The Lender

I have a local regional bank who has a Mortgage dept and they will also do an interim construction loan once i am quailified for the mortgage. Both owner occupied and investor. I may have to put 20% down on the interim loan for investor owned property. Which I have.  

They said the mortgage would be considered a refinance.

A) for investor I can cash out my down payment. Based on appraisal value. Rinse and repeat.

B) For the owner occupied they will finance the interim loan amount based on the approved amount for the mortgage. If the appraisal is enough to cover cost of construction then I would not be required to put up any further down payment, if it is not enough I would be required to bring enough cash for the difference. 

C) They are doing 75% APV investor and 80% owner occupied. No cash back on owner occupied only investor loan.

I have built homes and some rentals in years past and owned rental properties all through bank or conventional financing. 

I do not own any property after selling my home. This is the first Fannie Mae financing.

The Ratios

I am wanting to build a fourplex and then refinance to own as an investor and even own one as owner occupied.

If I understand it correctly - it works like this....

1) New fourplex monthly income and expenses projected by appraiser 

Rents of $1500 each unit 

Taxes at $1060.00 

Insurance at $120.00

2) My gross monyhly before tax income 

$8500

Less my debts (credit cards, loans, cars etc) for first level. Can’t be over 33%.

$1063.00. 13%

Less payments (PITI) of new property + debts ( if owner occupied can't be over 45-49% depending on lender)

$3854 + $1063 = $4917. 58% (over the ratio)

I can add to my gross income 100% of projected rents for owner occupied unit and the 3 units rented at appraisers estimates of 

$1500 x 3 = $4500/month 

Then calculate my debts and new PITI against that income.

$8500 + $4500 = $13,000

New ratios = 8% and 38%

For Investor owned...

I can tuse 75% of the appraisers rental value for all four units - 

$1500 x 4 = $6000 in gross rents x 75% =$4500 

Less PITI

PITI = $3952.00

Cash flow (if any left over that number can go to my gross income for qualifying.)

$4500 - $3952= $548.00 

And the PITI does not count any further for the 45% ratio since it is deducted from $4500 already.

New adjusted income with 75% rents less PITI

$8500 + $548 = $9048

New ratios 12% and 44%

(44% is using the new PITI) I don't have rental or house payment. My situation is unique in that my wife's job gives us a place to live and they do not charge us rent or utilities. It is not in the gross income number since it is not cash.

Thank you for the help in understanding this.