Home Buying in Savage>Question Details

Dean Peter, Home Buyer in Fort Myers, FL

which lender adds rental income to my regular income.so far no luck

Asked by Dean Peter, Fort Myers, FL Sat Dec 3, 2011

i want to buy a property rent it out however as it is about 350k and gets me 2300 in rent no lender adds the rental income to my regular income to stay within the dti;s

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7
Jim Simms’ answer
Hey guys, it’s not that simple, if you have a history of property management that helps, if you have never owned rental property the lender is required to make sure the deal will work for you. For example, if you do not have a tenant already lined up and a lease signed the lender is not allowed to count rent that doesn’t exist. Depending on the LTV the lender may require as much as 6 months of liquid reserves in addition to rent loss insurance. The guidelines actually protect you more than they do the lender. They increase the probability you will succeed. Here are a couple of lines from my underwriting manual that give an indication how specific the rules are, these are only a fraction of what we must cover, but I only included the parts that sound like your situation. Good luck, hope this is helpful.

Positive net rental income may be entered in Gross Monthly Income. Aggregate net rental loss must be included as a liability.

If the tenant is a family member, a copy of the fully executed lease and evidence of receipt of the rental income for 12 months, or period of the lease if less than 12 months, is required. On a brand new lease, the evidence of the receipt of the initial deposit is required. If documentation cannot be provided, no rental income may be considered.

If the borrower requires rental income from the present home to qualify, refer to the conversion to investment guidelines.

When the rental income relates to the subject property, an appraiser's opinion of market rent and, if applicable, copies of the current lease agreement(s) are required. The lesser of the appraiser's opinion of market rent or the lease agreements must be used. The gross rental income from the property will be equal to the lesser of the market rent established by the appraiser or the current rent based on the existing lease agreement (s). Net rental income will equal 75% of the gross rent; the remaining 25% of the gross rent is absorbed by vacancy losses and ongoing maintenance expenses. When the borrower has a history of receiving rental income for the subject property, the rental cash flow should be analyzed.
1 vote Thank Flag Link Sat Dec 3, 2011
Dean,
Is there a tenant in place? If so, most lenders will take 75% of the rent (if it the same or lower then what the appraiser found for the area) and wash it from your PITI. If it is a positive number, it is added to your income. If it is negative it is added into your DTI. For an investment property, don't expect the lender to go over 41% backend.
Jim is correct on the liquid assets you need for the purchase.
0 votes Thank Flag Link Mon Dec 5, 2011
Hi, Dean!
I'm not exactly sure what income is being missed. Do you already own this house? If not, how can the underwriter take in to consideration what you don't have? At this point, you only THINK you can get that amount in rent. Even if buyer have rental property that they are already getting rents for, they have to show a history of receiving rents. In other words, the money has to be in the bank in order for that to make sense.

Sorry. :( Good luck~
0 votes Thank Flag Link Sat Dec 3, 2011
Hi Dean,

The rental income should, in fact, be included. However, an appraiser will likely have a strong influence on the amount. Let me explain:

When the rental income is coming from the subject property being secured by a mortgage, a Residential Income Property Appraisal Report must accompany the loan file. A copy of the lease is also required. Based on the numbers of that report and the lease, the lender will allow the LESSER of the market rent established by the appraiser or the lease. This number indicated the GROSS rent allowed. From there, that number is reduced by 25% to obtain a net rental income figure. That number is the amount allowed to be added as income.

Hope this makes sense! The good news is your deal is quite "do-able".
Web Reference: http://www.sherrisherpy.com
0 votes Thank Flag Link Sat Dec 3, 2011
You cannot include property you do not own and rent you do not receive toward your debt to loan ratio. That would be similar to asking a lender to include a salary for a job you don't have. .
0 votes Thank Flag Link Sat Dec 3, 2011
it may be because there is no current lease to assure the lender that the income will be there. If there is a lease in place that doesn't expire next month with the tenant planning to move, you might have more luck.
0 votes Thank Flag Link Sat Dec 3, 2011
Hi Dean,

I have many lenders that do at 75% of the total rent.

Call me at 215-852-4469

Fred Glick
Licensed Mortgage Broker NMLS #133975
U S Loans Mortgage LLC
Licensed by the State of Florida
Web Reference: http://usloans.com
0 votes Thank Flag Link Sat Dec 3, 2011
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