Odd Rental Income & DTI Question. Help!

[Mehran K.]

I am in the process of closing on my first deal and I can't stop thinking about lining up financing for my 2nd!

Here is my situation:
Starting on May 1st 2012 I rented two spare rooms in my personal residence. I had to claim this as rental income on my schedule E. I wrote off 33% of my homes expense (mortgage interest, taxes, utilities etc) & depreciated the value of the home by the same 33%. According to the IRS it is 33% a rental property. This is all on my 2012 tax returns

Now It's 2013 and I am set to close on my first deal (yes!) on 04/05/13 so I will definitely have rental income from this property AND my primary residence tenants on my 2013 tax returns.

At what point will the lenders start to consider my rental income?
[b]My thoughts are:
At the beginning of 2014 I will have 2 years Schedule E rental income according to the IRS.
The loan processor working on my current deal said she can't use primary residence income unless it is a separate unit. She didn't specify as to whether or not this will income will start the 2 year Schedule E Requirement.[/b]

I don't see why it wouldn't and I'm hopeful because even with just the extra income from this rental property I'm closing on AND the next property (75% gross rents - PITI) I will be able to qualify for atleast 2 or 3 more properties in my price range.

I hope this actually makes sense, what do you think?

Thanks in advance everyone

[David Beard]

Mehran Kamari - you can get alot of different answers from mortgage originators on these kinds of questions. Investment lending is a small niche within conventional lneding, and 95% of mortgage originators won't give you accurate answers.

Find the lenders/brokers that are doing a good lending volume in your market. Look for financed rental property transactions in the MLS and on the county tax assessor site (look for 2-4 unit properties that are obviously rentals), or look at properties being sold by turnkey companies, or talk to agents who seem to sell quite a bit of nicer (financeable) rental property, and see who the lender was. Talk to other investors in your market as well.

You also want to find the investment property lenders that have in-house (on-site) underwriting. You will get MUCH better information from these lenders. Otherwise what you are told by a lender who primarily works with O/O wage-earners is likely just guessing on their part, or worse.