Quote from @Will Ducusin:
Me (and wife) are from Tennessee. My brother and his wife are from California. WE are planning on buying our first single family rental property in Tn. I and my family will be the first "tenants" for the property. Our plan is for my brother, who earns way more than me, to co-sign on my loan application and we will split the mortgages while I'm paying rent on the property.
Will having a co-signer increase our chance of approval? What strategies can you suggest?
You can't buy a house in your name, then live in it and call yourself a tenant, in a rental. Tenant has a specific meaning.
You may mean you intend to occupy. That would make the property "Owner Occupied" but not a rental.
It isn't entirely clear to me what the objective is here but one way may be for your brother to buy the house, you give him your portion of the down payment as an "option agreement fee" to buy into the property sometime in the future. The money you give him is called an "option fee" which gets applied to your future purchase price. All in writing drawn up by an attroney.
Only your brother owns the property at that point but you have a written "Option" which protects you. You then become the tenant and pay rent to him, he gets the tax write offs.
That keeps the IRS happy. As much as "happy" they can be anyway.
The thing to be very careful about is on the loan application it asks if you will be living in the property because an "owner occupied" interest rate is lower than an "investment" interest rate and they underwrite the loan accordingly.
Just make sure that if you agree to live in the property for the first year, that you in fact do live in the property for the first year.
It's mortgage fraud to lie on a loan application. So make sure you read the sections about occupancy. If you can't agree to whatever is written there, ask for your lender to help you figure out what kind of loan fits what you want to do. In fact, have that conversation with them up front so they can give you what you are actually looking for.
