Home Buying in Albuquerque>Question Details

Crystal, Home Buyer in Albuquerque, NM

Can you include future rental income when applying for a mortgage?

Asked by Crystal, Albuquerque, NM Sun Aug 22, 2010

My boyfriend and I are thinking about buying a house. Two of his brothers are currently living with us helping to pay rent and would move into the new house and continue to pay us "rent" to help cover the bills though their names would not be included anywhere on the loan. Our two salaries alone would not be enough to get a house so would we be able to qualify by showing that we could afford the house once we rent out those two rooms?

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The simple answer is probably not. A few years ago things would have been different, but a lot has changed. If any lender will allow (unlikely) the "projected income" to be allowed I would expect that at the very least they will require two years of proof that the brothers who are currently living with you have been paying a conistent amount towards your rent. These amounts would need to be verified either through cancelled checks (preferable) or bank statements showing the same amount of money consistently leaving their accounts consistently.

If the amount you are projecting the brothers would pay is higher than the amount they can prove they have actually been paying then I would almost guarantee the difference would not be counted.

I wish I could give you a more positive and favorable answer.
0 votes Thank Flag Link Sun Aug 22, 2010
YES there are several portfolio private lending programs that I put together like this.

If you are going to be receiving rents but you have not claimed them on your tax returns you will have a problem qualifying for a Conventional or FHA loan.

However you can use future rents with our private money

All you will need is to provide an executed lease agreement and we will help you use that anticipated income toward your debt to income ratios.

Let me know if you have a specific loan scenario you would like to go over with us.

- Jason Wheeler
0 votes Thank Flag Link Mon Oct 6, 2014
Hi Crystal:

Since, they pay cash and you dont declare it surely on your Tax returns, sadly but surely
dont bother with Regular Lenders.

Regular lenders want to see it deposited in the Bank, on Monthly Statements as well as declared
on your Tax returns.

Good luck.
Perry
0 votes Thank Flag Link Mon Aug 23, 2010
The fact that you can prove paying rent in an amount similar to your anticipated future mortgage payment consistently for the last four years is a very positive thing. This alone will not guarantee approval of your home loan, but it certainly strengthens the loan file. This piece (the rental history) of documentation is often referred to by lenders as a "Compensating Factor". I thorough examination of your situation might uncover more compensating factors that can be instrumental in securing a loan approval.
Web Reference: http://www.askmybroker.com/
0 votes Thank Flag Link Mon Aug 23, 2010
Crystal,

Again, I hate to be the bearer of bad news, but I don't think any of the income will be allowed for use in your qualification even with a fully executed, legal contract.

I am no longer a mortgage lender, but as a Realtor I work with a wide variety of different lenders. I recently had a buyer who was a business owner. He had a legal contract that indicated a significant order for his product which would be taking place in the near future. Given the nature of his business, it was simple to correlate the amount of income which would be generated by this already signed (but not filled) purchase order. The bank would not consider that "Projected Income" towards this buyer's qualification. The key ratio (as you probably know) is going to be your DTI or Debt to Income Ratio. Currently, lenders I am familiar with will only base your income on historical figures and not future projections regardless of how certain You or I felt the future income was.

The exception to this would be with a private money or "hard money" lender. The problem with this type of loan is that the interest rate would be ridiculously high.

To take advantage of today's incredibly low rates with a conventional or government insured mortgage loan we would have to find an alternative solution. It's very possible that one may exist, but it would require a more detailed analysis of your current situuation.
0 votes Thank Flag Link Mon Aug 23, 2010
good afternoon...no, it cannot be used in the way you discribed....
very best regards
bob mcclure
mortgage one
brighton, michigan
0 votes Thank Flag Link Mon Aug 23, 2010
Crystal, banks will not count this income unless you have a long-term lease and detailed, documented pay history, and even then, many will not. However, you might consider either a real estate contract purchase, as Chris mentioned below, or you might consider purchasing a house with a main house and guest house that has rental history on it. I can send you a list of those if you email me with your price range and area. No cost or obligation, and I will not spam you after that either! :o)
David Stafford
0 votes Thank Flag Link Mon Aug 23, 2010
Thanks for all the help.
Jesse-
It would probably be difficult to prove their past payments since they always give me cash other than to show that the amount of rent similar to the projected mortgage amount has been paid every month for the last 4 years. However, I was thinking what if we had a legal agreement for them to pay a designated amount of rent in the future. If this contract was already set up would we possibly be able to count at lease a % of this projected income into out "household income" total?
0 votes Thank Flag Link Mon Aug 23, 2010
Crystal - good afternoon. Wanted to add a few comments. Currently, working with a buyer now who is closing this weeks. He owns a rental property in Midwest and has documented lease, payments, etc. From my experience, most lenders are requiring you have two (2) years of verifiable rental history to off-set the mortgage payment of the rental from your debt to income ratio.

That being said there are some other strategies to obtaining a house through a real estate contract, lease option, lease purchase, etc. All of these strategies, in my opinion, require professional assistance. I would be happy to sit down with all of you and review your options.

Have a great day and look forward to hearing from you. Chris

http://www.nmrealestatenow.com
0 votes Thank Flag Link Mon Aug 23, 2010
Hi Crystal

Prudent to buy a multiple unit like a duplex or tri plex.

If you done qualify and they can't be on the loan, then it does not work.

You may qualify, buying a triplex, and using the income from the other two units.
Later, you change renters provided they are on. Month to month lease.

Perry
0 votes Thank Flag Link Sun Aug 22, 2010
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