Posted about 10 years ago

Update2Yrs of Rental history not needed to use future rents right away

Hello BP,

I wanted to write about conventional loans and 2 years of rental history. Fannie Mae, Freddie Mac and FHA don't care if you have zero experience in order to use future rents.

So if you're looking to buy a home and you think that you need 2 years of rental history that isn't the case.

Example:

If you make 3K a month, and your total payments that show on your credit report plus the new mortgage payment are 2K, your DTI ( Debt to Income Ratio ) is 66%, however if this property is yielding 4K a month, you can use 75% ( 3K ) of that amount towards your total income. So now your 3K of income is 6K and your DTI is 33% and qualifying for a loan is going to be much easier.

UPDATED!!!

If you do a loan throught Freddie Mac then you will be required to have 2 yrs of rental history so please keep this in mind when you consult a mortgage broker or a loan officer.

THE ABOVE PARAGRAPH IS UPDATED AS FOLLOWS.

Freddie mac no longer requires 2 years of rental history and can now do cash out on 6 mortgaged properties instead of 4.

FHA will also allow you to use future rents ( 85% ) to help qualify. Just remember that you typically can only have one FHA loan at a time. There are exceptions but they are very specific.

Comments (6)

Hi Shaun,
You mentioned if a bank does not have any overlays, you can count your rents on day 1. Can you explain what questions we would ask a loan officer to find this out, and do you know of any lenders that let you use all of the rents from day 1?

Lisa Phillips, over 6 years ago
Hello John,
The minimum is set by certain lenders. For instance mine is 50K. The max per county is set by Fannie and Freddie though. Take care and have a great day Sir.

Shaun Weekes, over 9 years ago
Hello Shaun,
Thank you for this blogs!
Does Fannie Mae set a minimum loan amount of $75,000 on this type of loan? Or is this limit set by certain lenders?
Thanks,
-John

John Truong, over 9 years ago
FHA typically goes up to a DTI as high as 54.9% but this is rare. Typically you're looking at 49% or less but again it can go higher depending on other factors. If you want I can find out more about your income and figure what your DTI is. This way I can give you options Sir.
Contact me by email and we can go from there.

Shaun Weekes, over 9 years ago
1. Update.
  FHA DTI can go up to 56.99% and I just recently funded a loan at over 55% back end. So with good credit and reserve's higher DTI is very possible.
  
  Shaun Weekes, over 8 years ago
Hey Shaun,
Thanks for the info!
I was thinking about doing the FHA what is the max they allow the DTI to extend to on the above example you did?

Michael K., over 9 years ago