How to use existing home as income to get new mortgage.

[Tenzin Yangzom]

Hello everyone, my name is Tenzin I have a high ranch house in Suffolk co NY without any mortgage.. I am a stay home mother and my husband has started a new company beginning of this year, he is very busy and doing great but we are unable to get conventional mortgage. What is the best way to get a mortgage we can put down upto 40% down for a 300,000 house. Thanks

[Albert Bui]

Originally posted by @Tenzin Yangzom:

Thank you everyone for advise, I am looking to buy more houses not wanting to sell the existing one.. It has legal apartment downstairs. I will look into RMLO thank you again everyone for your valuable time and advice.

 HI Tenzin,

It is true that you cannot use roommate income or what lenders call "boarder income," from your primary unless if its a legally zoned multi-unit property like a duplex, triplex, or fourplex. In the case of 2-4 unit you can use 75% of the other legally zoned/permitted units gross incomes to help qualify for other liabilities or properties. This applies to conventional financing however on FHA financing you "can," use boarder/roommate income. It all depends on your type of financing and how you structure your file. I suggest you find an expert to strategize with in this regard.

If you have a qualifying credit score (min 620 + ) and you have the min down payment you can qualify for a conventional fannie mae non owner occupied home with the assumption that this formula results in a positive number (below):

75% of potential gross income - PITIA (principal/interest/taxes/insurance/assessments) = positive number

The above also assumes you have $0 dollars of liability as well in monthly obligations (credit cards, lines of credit, other mortgages, etc).

I've checked with my head underwriters on this and have done loans for people who had no earned/working/self employed income or were not even employed at all. Fannie Mae will allow the use of rental income immediately and no documentation of 2 year of landlord experience via CPA letter or tax return is required. Loans positioned to be sold to Freddie Mac or banks sometimes have a 2 year requirement so its important to keep note that not all direct lenders can use rental income immediately it depends on the options the bank has to sell their notes on the secondary market and the risk tolerance of that particular lending institution to allow use of rental income immediately.

Example:

You find home for 100,000

Your mortgage after 20% down is 400 dollars

Taxes and Insurance are 200 per month

gross rents are 1000 per month

75% of 1000 gross rents is 750 income - 400 mtg - 200 Tax/Ins = 150 positive income for qualifying purposes

Since you have positive income, from a lenders perspective this is viewed as an income producing asset and it "adds," to your qualifying scenario. As long as you buy right you could potentially build your qualifying income with out having to work assuming you have enough capital to parlay (10 max financed properties available per borrower).

Hopefully that helped. Let me know if you have any questions.