Financing in 13501>Question Details

Andreany, Home Buyer in Utica, NY

Can rental income be taken into consideration when purchasing a multi unit owner occupied home.?

Asked by Andreany, Utica, NY Thu Jan 12, 2012

Im looking at purchasing a single family home that also has a 2 unit duplex on the property. Will this income opportunity be taken into consideration in any way during the approval process? ie: max loan amount etc
Thanks for any assistance.

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I believe my colleage misunderstood your question, he answered your question if you intended to rent out your primary residence and were looking to move and purchase a new home.

You don't need to show a history of being a land lord to purchase a multi-family owner occupied home. The appraiser will add a rent schedule to your appraisal to show the underwriter what the current market rents are for each of the units (including any that you may occupy). This would apply for both conventional and government loan programs. Keep in mind that lenders can add their own overlays (additional qualifying criteria) to be more strict than this base guideline.

The extra rent from the other units will be counted towards your income (but not to directly offset your mortgage payment) and the extra units will increase your maximum loan amount. Keep in mind that not all of your rent will count for qualifying, depending if it's conventional or government financing, you're looking at 75-85% of the projected rents on the property to be used for qualifying purposes. Also note that if it's a 3-4 unit government loan, 85% of your projected rental income (use all of the units in the building for this calculation) must cover the full mortgage payment including taxes and insurance to show the property is self sufficient if you were to run into a hardship and had to vacate the residence. For instance in Utica, NY, the loan limit for a three unit residential home in Oneida county would be 645,300 for a conventional loan and 419,425 for government financing (FHA/VA).

In addition to the above, you'll also need anywhere between three and six months mortgage payments in reserves after all your cash to close to show you can pay your mortgage payment even if you had a temporary financial hardship.

On a side note, the appraisal for a mulit-family property will be more than a single family so don't be shocked if the cost is more than you anticipated. The rent schedule does take the appraiser additional time to create and add to the report.
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2 votes Thank Flag Link Thu Jan 12, 2012
Thank you to all who posted with such helpful information, its much appreciated!
0 votes Thank Flag Link Thu Jan 12, 2012
Without much information, are the apartments rented, are there leases involved; the question can best be answered by your loan officer, therefore if you haven't done so yet do visit with any licensed loan officer; be aware that a mortgage pre-approval letter is required in order to determine your price range and for any offers to be taken seriously.
0 votes Thank Flag Link Thu Jan 12, 2012
Hi, Andreany. Are the apartments currently rented? If they are, for us and most lenders, you would need the leases and 2 years of rental history (i.e. seller's tax returns) in order to count 75% of their income.
0 votes Thank Flag Link Thu Jan 12, 2012
Rental income is considered when buying multi-unit properties, if their are signed leases, however the lender's assume some percentage of vacancy in their calculations....check with the lender to see what they do exactly.
0 votes Thank Flag Link Thu Jan 12, 2012
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