Will Two Rentals Hurt Ability to Get Approved for New Primary Residence?

Asked by Joe Prabil, Rockville, MD Fri May 18, 2012

Since 2004 my wife has been renting a condo and now we are thinking of renting out our current primary residence (house) (which is only in my name) and apply for a mortgage together so that we can move into another house to live in as our primary residence. Will these two rental mortgages be held against us even if we have renters to account for them?
Any other input/recommendations/suggestions to accomplish our ultimate goal will be appreciated?

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10
Greg Myers, Agent, Gaitherburg, MD
Sat May 19, 2012
By all means give Brent Mendelson a call for you financing. Brent has provided very detailed answers to future home buyers questions here on this "Q&A" forum leaving no question Brent knows what he is doing.

1st Mariner Mortgage has high standards for their loan officers, so I have no doubt you will be well served calling Brent.

Greg Myers
RE/MAX Realty Group.
1 vote
Piero Marinu…, Agent, Silver Spring, MD
Fri May 18, 2012
The simple fact that you have 2 rentals will not matter, but as Brent mentions, the bank will look at your income/loss on those rentals when it considers your ability to repay the new loan.

I've worked with Brent in the past - you'd be wise to give him a call to work though the specifics. From my experience, he knows his stuff and he's not going to twist your arm or steer you wrong.

Best of luck to you guys.
1 vote
Sam Hankin, Agent, Gaithersburg, MD
Fri Jun 8, 2012
Hi Joe,

Generally, lenders will consider rental properties as part of your overall liabilities and assets. A rental property won't count against you if the properties are currently rented and you can show a solid rental history for the homes. However, lenders won't give you a dollar-for-dollar credit for the rental income and generally will apply only a certain percentage of the rental income against the mortgage payment, if any, you must make.

I have owned rental properties and I have managed to obtain financing for new real estate acquisitions. So, if you have good credit and you can show that you have a signed lease and at least the first month's rent paid for your current primary residence, which you intend to rent out, you should be able to finance the purchase of a new primary residence.
0 votes
brent mendel…, Mortgage Broker Or Lender, Bethesda, MD
Sun May 20, 2012
Greg,
I remember that question and I believe I answered as well. No one is perfect and I have made my share of mistakes. I think we have to learn from them. I keep a file that's labeled "things that go wrong" for loans and I look at it and update it when something strange happens whether to me or to a fellow loan officer. I think the important thing for both agents and the loan officer is to communicate. If there is ANY red flag on a Realtor the loan officer should know. If there is anything the least bit out of the ordinary let us know. Like a second kitchen. There are ways to get it done but not if we don't know. That being said the loan officer should have reviewed the appraisal and caught it. Again hindsight is 20/20 and I bet it never happens again to that loan officer. If it was included in the listing also. I ask my agents to send me a copy of the listing now for things like that. I am working with buyers now in DC, reviewed the listing and saw it was a co-op. I told them we don't do those loans but if they liked it to buy it and how to find a lender that does them. Lucky for me they didn't like it and are buying a condo. Anyway that's the one thing I would ask Realtors to do so there aren't any last minute surprises and the clients aren't spending money on a home they will never own.
Thanks,
Brent
0 votes
Greg Myers, Agent, Gaitherburg, MD
Sun May 20, 2012
Brent,

Thank you for your kind words. What the public demands from us is expertise in our respective fields.

I recall a TRULIA real estate question from last December from a buyer who "Lost" his home purchase because his financing was FHA and the home he lost in Silver Spring had a second kitchen. Neither the listing agent or his buyers agent "KNEW" FHA does not allow second kitchens. The poor buyer likley PAID for a home inspection and an appraisal about $900.00 and did not get his house. This buyer and I talked together from his Trulia question on the kitchen issue and he was livid.

Who ever the loan officer was oviously did not know the home had a second kitchen because no one told him...the error could have been prevented. How much you want to bet the agents BLAMED the loan officer?

It does not cost the buyer or seller any more money to use BEST real esate agents or loan officers available.

Cheers

Greg Myers
RE/MAX Realty Group
0 votes
Kevin and Ju…, Agent, Wildomar, CA
Sat May 19, 2012
Hi Joe,

Looks like you've gotten good advice - Good luck to you!
0 votes
brent mendel…, Mortgage Broker Or Lender, Bethesda, MD
Sat May 19, 2012
Greg,

Thank you also for the kind words. Wish all my posts got such good review! :) Seriously I do appreciate it. Greg I have seen your answers as well and have been impressed with the depth of knowledge and honesty. Looks like you have some good choices to help out Joe.

Thanks,
Brent

PS I LOVE hearing that about 1st Mariner. I have been amazed so farby everyone on the team.
0 votes
Marcellia Ke…, , Gaithersburg, MD
Sat May 19, 2012
Hi Joe,

I would love for you to come into my office where I can set up a meeting with you and a lender as well as discuss the purchase of the home. This way, you kill two birds with one stone. We are partnered with two lenders BB&T which has great programs for buyers right now, as well as First Home Mortgage. The lender is best qualified to answer your questions. After you speak with the lender, I will be there to help you purchase the home you want. If this sounds good for you, please call me at 202-446-7921 to set up an appointment today.
0 votes
brent mendel…, Mortgage Broker Or Lender, Bethesda, MD
Fri May 18, 2012
Thanks very much Piero I really appreciate it. Joe I would tell you the same thing about Piero as a Realtor. He knows the area very well and is on top of his game. If you qualify for a loan defintely give him a call. He will take good care of you.

Thanks,
Brent
0 votes
brent mendel…, Mortgage Broker Or Lender, Bethesda, MD
Fri May 18, 2012
Joe,

The mortgages will be counted against your DTI (debt to income) ratio. Whether you can use the rental income depends on the amount of equity you have in the property. It has to be 30% equity to use rental income to qualify per Fannie/Freddie/FHA. Hope this helps and if you ever want to run some numbers just let me know.

Thanks,
Brent Mendelson
1st Mariner Mortgage
Nmls#111407
0 votes
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