Shannon,I cant speak on behalf of your mortgage lender to explain why they can't use your property as a rental unit but i am happy to explain how we calculate rental income to qualify our borrower's.
There are 2 options available for us when it comes to rental income:
If the property is listed on your last 2 years tax returns as a rental property on Schedule H, then we use this income and we factor in 75% only of the income receive to add to your household income, If you also have rental income depreciation, we add the depreciation amount towards the rental income to qualify you.
Option#2 (Your case)
If the property is currently a primary resident however it will be converted to a rental property, then you send out an appraisal to determine the current market value of your home (Also you may consider asking a realtor to do CMA to get a feedback of your home value), if the appraisal comes back with a value that is greater then your current mortgage loan amount by 25% then we should be able to consider your current property as a rental property income towards your DTI (Debt to Income).
* If your current property has no Equity then i will recommend you to first try to refinance and take advantage of the low interest rate we are offering , therefore when we calculate your DTI , you will be able to qualify for both mortgages (Current & new mortgage).
*If this is not an option, you might consider Jamie's suggestion and try to sell your property since we really have a very low inventory in Arlington and you may get what you looking for as an investment.
If you need a second look on the mortgage application that you had submitted to the other lender, i will be more then happy to do so. Also if you need to look over the refinance options that may be available for you, i can help.
Our office is located on 4100 N Fairfax Dr# 301, Arlington, VA 22203, i can schedule you to come in or we can speak over the phone as well.
In mean time, please let me know if you have any other questions.
Vice President, NMLS# 1033582
George Mason Mortgage
Follow me on Facebook: http://www.facebook.com/adamm.elkassar