Courtney Lan…, Home Buyer in Garden Grove, CA

Will renting out rooms in a home get us more from a lender?

Asked by Courtney Landeros, Garden Grove, CA Fri Mar 23, 2012

My husband and I are interested in buying our first home. I'm a stay-at-home Mom and my husband works at an insurance company making a little over $40,000. We have very little debt-- we currently owe less than $3,000 between the two of us; our monthly payments are less than $100. Anyway, I know our total income isn't ideal. We plan to move out of Garden Grove, CA to Corona, CA where houses are significantly cheaper.

Would it be possible to get "more house" if we plan on renting out rooms? For example, if we're only able to get $150,000 for a house, would having roommates lined up get us more money for a house? Or would a lender only look at what we can afford regardless of roommates?

I hope this makes sense... I know in my head what I want to ask but I'm having trouble putting it in words! Thanks in advance.

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10
Kawain Payne, Agent, Seal Beach, CA
Sun May 20, 2012
Hello Courtney,

If you are buying a single family home, renting out rooms will not help you qualify for a larger loan amount. Most lenders will not consider any rental income from renting out rooms in your single family home as income.

If you however purchase a duplex for example and plan to live in one and rent the other out, that rental income could be taken into consideration.

Best of Luck to You.

Kawain Payne, Realtor
0 votes
Deborah Garv…, Mortgage Broker Or Lender, San Diego, CA
Sun May 20, 2012
Courtney,

I answered your other question, so won't go into lengthily ndetail here. Please review my response for suggestions. As stated, NO you cannot use rental income on the subject property for qualification, UNLESS it is a multi-unit structure.

Really, I promise, you will get far more comprehensive advice if you talk with a mortgage professional as I suggested in my previous comment. Seriously, we do not bite and, by law, we cannot charge you for consultation...so what do you have to lose. Contact a mortgage professional directly.
0 votes
Kawain Payne, Agent, Seal Beach, CA
Sat Mar 24, 2012
If you are buying a single family residence renting rooms will most likely not effect the amount of money you qualify for.

If you are buying income property then the rents can be used as income, and may help you qualify for more.

You could buy a duplex, plan to live in one and rent the other. In this case the rent from the unit you rent out may be used as income, and help with loan qualification.

Best of luck to you.

Kawain Payne, Realtor
KawaindPayne@gmail.com
0 votes
Debbie Brown, Agent, Laguna Beach, CA
Fri Mar 23, 2012
Hi Courtney,


An important aspect of a mortgage is being able to ensure the lender that they are not taking a risk in losing money on the loan. Most people will turn to relatives when they need a co-signer. Young people, especially, will often ask their parents for surety when they are seeking to secure a mortgage. I would seek the advice of a mortgage lender to review your options because until you sit and review the situation with a lender you will not have the answers you want to hear.

Debbie Brown
Broker
Orange County Real Estate Group
Office: 888-863-7480
Cell: 949-735-4185
0 votes
David Pham, Agent, Garden Grove, CA
Fri Mar 23, 2012
Courtney,

In general, credit scores above 740 are considered A+ credit. However, low 700s scores are not that bad. You may not get the best rates on the market, but 700s scores will qualify for both Conventional and FHA loans.

Most of conventional lenders will not allow non-occuppying co-borrowers while FHA lenders will allow those.

I'm a mortgage broker and our office is right in Garden Grove. You are more than welcome to call us for a free consultation. I'll answer ALL questions that you may have.

David Pham
National Brokers
714-530-3331
0 votes
Courtney Lan…, Home Buyer, Garden Grove, CA
Fri Mar 23, 2012
Thank you all so much for your timely responses. I was also wondering about cosigners. My in-laws are willing to co-sign for us. My husband and I both have credit scores in the low 700's, so we wouldn't be needing them because we have bad/low credit. Would their help allow us to qualify for more money from a lender?
0 votes
Willy Olsen, , Claremont, CA
Fri Mar 23, 2012
The amount of home you can buy is not based on the amount of tenants you can rent rooms out to. If anything it will work against you.
Talk to your lender and get qualified for a home loan.
Make sure you have enough to cover your closing costs.
0 votes
David Pham, Agent, Garden Grove, CA
Fri Mar 23, 2012
Courtney,

Your question makes total sense.

Proposed incomes from renting out a room will NOT be considered by lenders.

With your income of $40k and little debts, you should be easily qualified for a new loan in your purchase range. If you need further details, please give me a call.

David Pham
National Brokers
714-530-3331
0 votes
Debbie Brown, Agent, Laguna Beach, CA
Fri Mar 23, 2012
Hi Courtney,

First and for most I would talk to a lender because this is future income not income that is happening now.
But on the other hand here are some pointers on renting out your rooms:
Your question is timely because many homeowners facing mortgage or other economic stresses are looking at room rentals as an option to increase their income. Most of the state laws governing tenant-landlord relationships in traditional homes apply equally to the room rental you are describing. For example, the requirements for performing maintenance and repairs, the limits on a landlord's right to enter the rental premises and the security deposit requirements all apply. In other words you need to make sure you have contracts in place this will be important to the success of renting out rooms

Debbie Brown
Broker
Orange County Real Estate Group
Office: 888-863-7480
Cell: 949-735-4185
http://www.orangecountyrealestategroup.com
0 votes
Sherry Saudi, , Grosse Pointe Farms, MI
Fri Mar 23, 2012
If you use income from renting your house the lender will view your home as a boarding house. Also what will the city codes allow. .
This then makes your home a commercial property, not a single family resident
It would be better to finds a home that has an apartment attached that they city will allow you to rent and a portion of that income can be included.
Sherry Saudi
Johnstone and Johnstone-
Office 313-884-0600
Cell 888-395-0478
0 votes
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