Specialist · Ann Arbor, MI · Member since 2016 · 355 posts · 191 votes
I have a significant amount of short term rental income on my primary residence this year, which is the only property that I currently own. I will be selling it in 2018 and buying a new primary as well as an investment property. If I have a similar amount of rental income in 2019, will a lender simply see that similar amount and then count that as a two year track record of income, or will they notice the different properties and want to see a two year track record with the same property?
Lender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
7y
@Sarah Lorenz there are a lot of different stories you hear about this so here's the right information you should know:
When purchasing an investment property (not your primary home) you should be using a lender that gives your rental income IMMEDIATELY for the house. So if you are buying the property, and the property isn't rented....you should STILL be receiving credit for the rental income on that property. When you purchase, even if it's EMPTY, you should be receiving credit for the rental income. If the lender you are working with does not give credit for this, then change lenders immediately and find one that does.
In theory, when you purchase a rental property your "Debt to Income" ratio should be getting better.
Now, if you are buying a primary, single family home...it is not customary to receive rental income credit. A duplex you would but single family, no.
I hope this helps in some way but tag me with any additional questions. Thanks!
I have a significant amount of short term rental income on my primary residence this year, which is the only property that I currently own. I will be selling it in 2018 and buying a new primary as well as an investment property. If I have a similar amount of rental income in 2019, will a lender simply see that similar amount and then count that as a two year track record of income, or will they notice the different properties and want to see a two year track record with the same property?
Lenders will want to see all sources of income and all debts for the last two years. For income they typically want two years and the intention going forward for years for any source of income you are using to repay the loan. Reason being that you are repaying the debt out of future money. They want to see a viable source for that money.
Lender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
7y
@Sarah Lorenz there are a lot of different stories you hear about this so here's the right information you should know:
When purchasing an investment property (not your primary home) you should be using a lender that gives your rental income IMMEDIATELY for the house. So if you are buying the property, and the property isn't rented....you should STILL be receiving credit for the rental income on that property. When you purchase, even if it's EMPTY, you should be receiving credit for the rental income. If the lender you are working with does not give credit for this, then change lenders immediately and find one that does.
In theory, when you purchase a rental property your "Debt to Income" ratio should be getting better.
Now, if you are buying a primary, single family home...it is not customary to receive rental income credit. A duplex you would but single family, no.
I hope this helps in some way but tag me with any additional questions. Thanks!
My 2 cents: All Lenders have different standards. You should have multiple lenders depending on the loan you are getting. i.e. I have a lender that only gives "vanilla" loans and he has the best rates on our primary house. Then there are lenders who do loans for REI and they understand the risks involved with rentals. Most of them have a 2 year requirement. This is to show you are more than a dreamer and that you can handle being a landlord.
Disclaimer: I consider myself a novice in all things REI but I love to read and talk to everyone.
Lender · Chicago, IL · Member since 2018 · 352 posts · 147 votes
7y
@Garry F. what you said it’s incorrect. All conventional lenders have the same rental income guidelines as they follow Fannie and Freddie.
@Sarah Lorenz if you purchase 1 unit as owner occupied there is no rental income that can be used for qualifying purposes, however if you purchase it before you sell your departure residence then you are allowed to use rental income from the departure residence, you will need a lease that starts after closing, some lenders might require to see the rent deposit check in your account.
If you purchase a MF (multi family) then yes, the net rent on the other units is added to your income.
FHA is the only program that will not allow rental income from departure residence to be used if is within 100 miles radius from your new purchase