How do lending institutions view income properties???

[Brandon Jenkins]

Hello BP family!!  I need your help once again.

Question: Do lenders look favorably or negatively at income properties? 

Details:  Long story short, I have one rental property (newbie here), and am currently in the market for a primary residence.  I'm worried about whether my income property will negatively impact my creditworthiness.  The rental was purchased using a combination of personal funds and a ULOC, so there's no note on the house, at the moment.  However, I'm strongly considering using a cash-out refi to pay down the ULOC and free up some capital (which would mean carrying a mortgage on the rental unit). 

I would think the lender would see the rental in a positive light, since it's an asset.  Anyway, I thought I'd turn to the experts here on BP to help me out on this one.  What do you all think??

[Scott England]

Brandon Jenkins
The rental itself should have little impact on your credit worthiness, unless something is amiss with that LOC.

Assuming you want a secondary market loan for your primary:

If you have had the rental long enough to claim the income on your tax return, you can most likely use that income to help qualify (or loss, if that is the case)

I would strongly consider a secondary market loan for a cash out refi of your rental. Take down a 30yr fixed, take advantage of the low interest rates on Fannie Mae loans and use the cash for a down payment on your primary (or another rental)