Buy investment property and include rent for income with no prior rental history.

Asked by Allgood2010, Sacramento, CA Fri Mar 4, 2011

Ok here is the situation. My mom found a home and has a Purchase Agreement/Contract.
Fico is 820 and will be putting 30-35% down.
She currently owns a home and is buying the new one to be able to live in when she retires in 3 years. When she moves in to the new home she will of course sell her old home. Myself and fiance will be living in and paying rent for the next 3 years until she lives there.

I do understand that only 75% of the rent will be considered and the rest will count against her DTI (with both properties she is at 58% without including the rental income). If she is able to count the rental income she will be at 40% DTI or slightly under.

I have read that unless you have 2 years prior rental experience the income will not be counted. Is this true or is there ways around it such as a 2 year lease being signed and proof of deposit being shown? If the renter can not be family my fiance could sign it if that is an issue.

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11
, ,
Mon Mar 7, 2011
BEST ANSWER
Allgood2010,

Our own bank would let your mom use 75% of the rental income with just a rent survey, she will not need landlord history for the subject investment property.

Thierry

Thierry Abel
Senior Loan Consultant
All California Mortgage
P: (415) 464-8261
C: (415) 378-7508
F: (415) 464-2367
E: tabel@allcalifornia.com
NMLS 304353 - DRE 01380701
0 votes
Scott Thiel, Agent, South Lake Tahoe, CA
Mon Mar 7, 2011
Glad it worked out. I am not sure why people use Quicken or other online loan companies... Education I suppose.
0 votes
Allgood2010, Home Buyer, Sacramento, CA
Mon Mar 7, 2011
Thank you for your help. We found a loan and someone to work with over the weekend. Turns out my Mom's DTI was closer to 50% not 58% and with all her assets it was an easy loan. Fees were really low, payment was perfect. Everything just fit into place perfectly with no issues. We ended up going NOOC and not needing to include the rental income.

Also yes, my Mother was Pre Qualified before finding the house. This was through Quicken though and after doing research there were many reasons to not use them.

Thanks again for all of your help.
0 votes
Scott Thiel, Agent, South Lake Tahoe, CA
Mon Mar 7, 2011
I understand your frustration. Question: Why wasn't your mother prequalified with a loan agent BEFORE going through with the deal? Your mother's agent should have looked out for her best interest a little better...

Please call Ed Bevacwua with Evergreen Home Loans at 530-682-7801. This is his cell phone, no secretary. He will need to talk to the principal, so have your mom's information handy. Whatever Ed says will happen, will happen.

Scott
530-701-6674
United Country Real Estate
Broker-Owner
UCSacValley.com
lic 00987674
0 votes
, ,
Sat Mar 5, 2011
If your mother will be financing over $417,000 we have two banks that will give her rental income per appraisers opinion at competitive rates. No prior landlord experience is required.

Happy funding, Rudi
Web Reference:  http://www.umboc.com
0 votes
Allgood2010, Home Buyer, Sacramento, CA
Fri Mar 4, 2011
That would be impossible, I am in no shape to try to get a loan now or in the near future.

I am looking for solutions to the situation at hand. We are exhausted at hearing, pay off the first home and take all your money out of 401k to get it all done or other ideas. The whole issue with this is DTI. Fico is great, down payment is great with plenty left over in 401k. No other debts at all.

I've also thought about no ratio but I'm trying to not go in that direction. I just need a mortgage/loan officer who can get this done or someone to say there is no way.
0 votes
John Arendsen, Agent, Leucadia, CA
Fri Mar 4, 2011
Just remember that all RE deals have to be what they call an "Arms Length Transaction" meaning that you can't really bring your fiancée into the loop without crossing that line. Just a thought.
0 votes
, ,
Fri Mar 4, 2011
Home Buyer,

Can't you buy the home as your principal residence with your mom as the non occupant co-borrower?
0 votes
, ,
Fri Mar 4, 2011
If your mother owns an existing residence and to use the rental income on the departing property to help help qualify, she can if she has “30% Equity Cushion” on her current house and would have to provide lease agreement and cancelled check.


Thierry

Thierry Abel
Senior Loan Consultant
By Referral Only
All California Mortgage, Inc
P: (415) 464-8261
C: (415) 378-7508
F: (415) 464-2367
E: tabel@allcalifornia.com
0 votes
, ,
Fri Mar 4, 2011
If you plan to purchase your first rental home, do not expect to use rental income to qualify. If you have history managing rental income properties, then the lender may allow you to use the income. (you do not need 2 year history)


Thierry

Thierry Abel
Senior Loan Consultant
By Referral Only
All California Mortgage, Inc
P: (415) 464-8261
C: (415) 378-7508
F: (415) 464-2367
E: tabel@allcalifornia.com
0 votes
Allgood2010, Home Buyer, Sacramento, CA
Fri Mar 4, 2011
I also wanted to add that it seems as if I am doing all of the "creative thinking" for the lenders/brokers I have contacted. I used to be a loan account executive almost 10 years ago (so I am very much out of the loop) and wondering why these people aren't asking more questions or listening to what I am saying. I actually called one lender I was referred to and the first person who answered completely screened the call and after 5 minutes agreed to take down my info to have the person call me. An hour later that person's secretary called me back wanting to clarify if I wanted to meet or speak with the person. I felt more like a telemarketer rather than a prospective customer.

I have so far dealt with Wells Fargo, Amerisave and Paramount Home Equity. Of course I approached it as a loan for a second home until I through my own research and advice I was given through Zillows to approach it as an investment property.

The point being is I need help with this and fast. We have to have an approved loan by the 12th of March and close by the 14th of April. This weekend my Mom is scanning and sending me all the docs I told her together so that once we find someone able to help us we can do our part as quickly as possible.

If anyone can offer me solid advice and suggest a solid lender/broker I will call them before anyone else as we are serious about getting this done.
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