Using rental income to qualify for a loan

[Jose Leanos]

Hello all,

I am in the Los Angeles area and looking to sell my single family home to buy a multi family property. I have about 300k in equity and my plan was originally to sell my home and go live in a trailer on my parents property while I worked on a deal for a multi family property. I have read on Fannie Mae however that you need to own a current primary residence or have a current living expense in order to be able to use the rents of the purchased property to offset the mortgage.

I wanted to sell my home first and then buy after in order to increase my leverage when negotiating on both the sale and the purchase but if I can’t use the rents that would greatly diminish my ability to qualify for a bigger loan.

Just because I know it matters, my current salary is about 8k per month with only 1 recurring debt payment(student loans) at $318 per month and my credit score is 760+. My savings are only about 20k with the other 300k being tied up in the equity of the home I currently live in. I know I put a lot of money into the home instead of leveraging or investing, that was my bad.

If any lenders would like to comment I would greatly appreciate it, I am hoping to finance a 3-4 unit in the 1 million dollar range to take advantage of the low loan rates.

-Confused in LA

[Brent Coombs]

@Jose Leanos, you need to research the "self sufficiency test".  Here is an earlier thread on the topic: https://www.biggerpockets.com/...

Afaik, for an FHA Loan for a 4-plex, the "75%" Rule still applies. Cheers...