Schedule E Hurts... When you want to buy again.

[John Hanson]

I bought a condo as my Primary Residence in July 2011. A few weeks later, I began renting out a room.

In January 2012, I rented out a second room and continued living there with two tenants until July 2012.

In July 2012, I moved out of the condo, and I've continued renting an apartment with a friend. My condo is completely rented out, and I net about $400 per month after all expenses.

I'd like to purchase a different (larger) condo to move into with a friend, but I'm having trouble qualifying. My Mortgage Brokers said that the Income and Expenses on Sch E of my 2011 tax return are a problem. Somehow, the calculation required by Fannie Mae results in negative Monthly income of about $1050 (which incidentally is the amount of PITI and HOA fees.

I'm not sure what I can do. It sounds like I would've been better off claiming no income or expenses on my Schedule E. I have more income that I did before I purchased my first condo (because I'm netting $400 per month), but I can't qualify for a new, owner occupied convention mortgage.

Can anyone give me some advice? I'm not sure what I can do (or what I should have done to avoid this in the first place. I'm thoroughly confused....

Thanks for any thoughts you may have...