Rental income is calculated using Schedule E from the tax returns for at least 1 year (or 2 years if it's been owned for 2 years), or if it's been acquired after the most recent year's tax returns have been filed, then the lease agreement is used. Then you reduce it by the expenses on the property, the result is either a positive (added as income) or negative amount (added as a liability). So if your calculations are correct, you would get $60/mo income from rental property #1 & $650/mo income from rental property #2... and no liability from either of those properties, leaving only the $620/mo car loan & $250/mo student loan to be included in the debt ratio (as it appears you would be purchasing the new home after or at the same time as you are selling your current primary residence). If you purchase a new home for $260k ($260k minus $80k down payment = $180k mortgage), then from the numbers you provided, I figure your debt ratio should be less than 30%.
Was the credit union you spoke to still considering your mortgage on your primary residence in the debt ratio? Even if they were, you still look like you could qualify for a $260k sales price.
Obviously I'd have to look at the actual numbers to give you pinpoint accurate advice, but from the info you laid out my take on your situation is it should be possible to qualify for what you are looking for.
Shane Milne | Lending in all 50 states | NMLS #81195... more
You need to be aware of what is known as your debt to nome ratio. This is one of the tools lenders use when qualifying home buyers. To measure this ratio is to compare all housing debts, which includes your mortgage expense, home insurance, taxes and any other housing-related expenses. Once you have the total housing expense calculated, divide it by the amount of your gross monthly income.
My suggestion is you talk to a lender, Prosperity Mortgage 410-263-2688 tell them Robert Knapp from the Long & Foster Office in Stevensville suggested you.
Indications have shown that buyers are starting to make a move. Sales have increased so it might be a good time to revaluate the selling of your homes.... more
One more thought....if you financial advisor suggests an alternate investment and you wish to continue to purchase rental properties, consider looking into a "self directed IRA" which, if you save enough cash to make the maximum contribution each year can be directed to purchase your piece of investment real estate once you have sufficient monies to do so. Look at www.penscotrust.com to learn more about self directed IRAs.