Financing in Massachusetts>Question Details

Lucy, Other/Just Looking in 01915

If I am buying an owner-occupied multi-family home, is the expected rent per rental unit included in the calculations?

Asked by Lucy, 01915 Mon Dec 27, 2010

For instance if I buy a 3-unit house, plan to live in one unit and rent the other wo units for $1000 each would that $2000 be considered as part of income to allow for the larger mortgage? $1000 is a fairly low rental cost for the Boston/Beverly, MA area so neither of them would probably be vacant for more than a couple of months ever. Apartments in an apartment building run a minimum of $1000 in this area, more typical is a cost of $1200/month.

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p.s: If the current owner can provide documentation supporting 2 years receipt of rental income, that would be a great help to you in underwriting. Furthermore, lender will do a rental analysis to determine the average rental income for your area as well. What ever that is, that may be the basis they use to determine the rental potential of any currently vacant units in the home. Remember: lenders always go conservative and err on the side of caution. Hope this helps.
0 votes Thank Flag Link Wed Dec 29, 2010
hi, Lucy

Cherrie is correct. You'll only be able to include the income so long as the units are currently rented and the leases are good for at least a full 12 months. If remaining time on current leases are less, a letter of intent to stay and other cooresponding documentation may be required from current renters. Good luck!
0 votes Thank Flag Link Wed Dec 29, 2010
Hi Lucy,

If the units are currently rented out, you will be able to use the rent as income when purchasing the building. If the building is vacant, lenders will not allow you to use project rent.

I hope this helps.

Good Luck with you purchase!

Cherrie Catama
Bridgeview Bank Mortgage
c.catama@mybbmc.com
0 votes Thank Flag Link Wed Dec 29, 2010
Yes, I believe the lender would look at the rental income as income towards calculating what you can borrow. Make a call to your bank's loan officer and talk to them about the rules.
0 votes Thank Flag Link Mon Dec 27, 2010
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