If I buy a multi-family house, does the banks require that I find tenants for the units I will rent so that I can use the rental income to qualify?

Asked by Steve Yulkis, Astoria, Queens, NY Mon Feb 25, 2013

I'm looking for a multi-family house. I have not found one yet. But I'm wondering if the lenders will allow me to use the rental income from the other units to qualify for a higher amount. Friends of mine told me they did when they bought a house but that was over 5 years ago.

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12
Javier Menes…, Mortgage Broker Or Lender, Melville, NY
Mon Feb 25, 2013
BEST ANSWER
Steve, depending on what loan program you'll be using, most times a lender will allow you to use a percentage of the market rental for the other unit as part of your qualifying income. As mentioned bellow, this will only be possible on an FHA or Fannie Mae loan without documenting 2 years experience as a landlord. I suggest you meet face-to-face with a Loan Officer and go over this same topic. Though it is allowed, you can see how one bank might go about it differently than another.

Meet with a Loan Officer, go over your pre-approval, this and any other questions you may have. I'm always available should you need someone to help you. Good luck!

Javier Meneses
Senior Loan Officer
NMLS #23130
STERLING NATIONAL BANK
310 Crossways Park Drive
Woodbury, NY 11797
jmeneses@snb.com
5 votes
Michael Denn…, Agent, Queens, NY
Wed Feb 27, 2013
HI Steve,

I have closed many multi-family mortgages, especially for two-family homes in Brooklyn, Queens and Bronx for first time buyers without prior landlord experience who were not required to have tenants.
But there are many factors to be considered besides the tenants and your own qualifications including loan program, down payment, is this an investment property or will you live there and the list goes on.

I recommend that you meet with an experienced loan officer to go over all the particulars of your scenario in detail. And if needed, get a second opinion because requirements vary from bank to bank even within the same loan program. For more information, I can be reached directly at 917.699.0183 or via email at michaeldenniston247@gmail.com. Follow me on twitter via @mdenniston247.

I value your feedback so please give a thumbs up or click best answer, if my response was helpful.

Thanks!

Michael Denniston l Cell: (917) 699-0183
Residential Home Funding, Corp.
Licensed Mortgage Loan Originator l Sales Manager
6901 Jericho Turnpike Ste. 219 | Syosset, NY 11791
Main: (516) 605-1733 | Fax: (888) 881-2557
NMLS # 24076 | Company NMLS # 34973
Mdenniston@RHFunding.com
http://www.rhfunding.com
.
2 votes
Javier Menes…, Mortgage Broker Or Lender, Melville, NY
Mon Feb 25, 2013
Larry, I respectfully disagree. What you're describing is applicable to only Freddie Mac loans. FHA for one does not require any sort of experience as a landlord, neither do Fannie Mae loans. It's possible that the lenders you've ran into sell loans to Freddie Mac and so originate their loans accordingly to their selling guides.

Javier Meneses
Senior Loan Officer
NMLS #23130
STERLING NATIONAL BANK
310 Crossways Park Drive
Woodbury, NY 11797
jmeneses@snb.com
1 vote
Linusokeguale, Home Buyer, New York, NY
Wed Feb 4, 2015
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0 votes
Lucky, Agent, Forest Hills, MI
Fri Mar 1, 2013
DEPENCE WHERE DO YOU WANT TO BUY. I CAN RENT IT
0 votes
, ,
Mon Feb 25, 2013
Every lender/bank varies on this, however, there are some who will allow the income to be used for qualification. There are still other factors which must be addressed as they are equally important pieces to the puzzle. I recommend we speak more about your scenario and discuss all of your options so it's a smooth experience from start to finish. Please contact me directly by phone or email; whichever is of greater convenience.

Kindest regards,

Paul Marzolla
Loan Officer
(201) 957-6768
pmarzolla@unvmortgage.com
0 votes
, ,
Mon Feb 25, 2013
Steve

After flagging this question as a seemingly easy one to answer and one that I receive all of the time, I read all of the answers and if I were you I would be more confused by the answers. Shane Milne gave you the correct answer but as in many of these Q&A scenarios it will require more details for you to grasp a better understanding of how to use rental income to qualify for a mortgage when buying a multi family house. For the layman who is looking to buy a home to live in or as an investment the terms FHA, Fannie Mae and Freddie Mac although familiar terms to most are menaingless. The % each program will allow you to utilize as rental income, and lingering questions about whether you need tenants in place or living in the property, the bottom line is your still left to decipher what to do next and it is still confusing. If you want to speak and/or meet, let's arrange a time and I will get you straight with the right answers.

Peter Brown
0 votes
Steve Riddle, Agent, New York, NY
Mon Feb 25, 2013
The First question everyone here giving their advice "Should" be.
1. How many Units does the building consist of?
2. Are you going to be living in one of the units?
3. Are you planning on using a Mortgage banker or a mortgage broker? (do you understand the Diff. between the two)
After those 3 basic questions have been answered.
Astoria, NY 11103 -06
Median home sale range on 2 -4 Family dwellings Comp Dates of 01-02-2013/ 02-12-2013
790K to 1.5MM on brick Semi Attached and Attached
0 votes
Anna M Brocco, Agent, Williston Park, NY
Mon Feb 25, 2013
Be aware that a mortgage pre-approval letter is required in order to determine your price range and for any offers to be taken seriously; therefore visit with any licensed loan officer, he/she can accurately answer any questions as they apply to your specific situation.
0 votes
My NC Homes…, Agent, Chapel Hill, NC
Mon Feb 25, 2013
Unless you have two year of documented experience as a landlord, rental income will not be counted under any circumstances by your lender. IT doesn't matter if you have signed leases, security deposits etc. It will not be counted. Only the income of whoever is on the mortgage will be counted so if you're thinking you'd qualify for a larger loan based on rental income you need to adjust your plans.

Do yourself a favor and make an appointment to sit down with a lender and explore your options before you start working with a Realtor so that you have a clear understanding of what you're able to afford.

Best of luck to you.
0 votes
Josh Barnett, Agent, Carney, OK
Mon Feb 25, 2013
Typically the complex will need at least 2 years of continuous income to be counted and only a portion of this rent may be counted.
0 votes
, ,
Mon Feb 25, 2013
Steve,

It isn't a requirement that you find tenants, but if you want to use rental income to help you qualify then it's a requirement that there are tenants. The rental income can be considered without a prior landlord history if you use a Fannie Mae loan program or FHA financing (if you have a 2-year landlord history, then Freddie Mac loan programs will allow the rental income too)... 75% of the rental income (if Fannie or Freddie financing) or 85% (if FHA financing) can be used. FHA financing would only be for owner occupied properties though. You would need signed lease agreements and most likely receipt of the security deposit and/or 1st months rent.

Shane Milne | Lending in all 50 states | NMLS #81195
shane@thebesthomeloans | 949-273-4161 direct
0 votes
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