Close

See current mortgage rates on Zillow Mortgage Marketplace

Profile picture for Trish1974

Lender won't use rental for income! Is this standard??

I have applied for a mortgage, and this specific company (local mortgage lender not an online service) will not use my rental house as income because I have been living in it since my divorce in March 2012.  He said he could not use it if it hasn't produced an income for a year, even though it had been used as a rental for 7 years prior and I have tax returns to prove it.  Is this a standard rule among mortgage companies, or just this particular lender?
  Flag content
Close
Report a Problem

Please enter a valid email address.

Close
Content flagged

We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

Close
We're Sorry
This service is temporarily unavailable. Please come back later and try again.
September 03 2013 - US
We think we've answered this question for you!
  • Be a Good Neighbor. Be respectful and on-topic. No spam or self-promotion! See our Good Neighbor Policy.
 
 

Answers (9)

I did the same thing that you are trying to do, but since I knew the pitfalls, snarls and traps, I did it strategically. All traditional loan programs require rental income verification which must be seen on your IRS 1040s Schedule E. For Freddie and Fannie, lenders will require a 2 year history. For FHA, VA and USDA, you will only be required to have filed a Sch E in the most previous tax year.

So what I did was rented out my home out in December, 2012. I moved into a rental on a month to month basis. I changed all my documents to my new address i.e. bank statements, paycheck stubs, etc. Then I filed my tax return claiming ALL of the rental income (no loss), taking my standard interest, property tax , and homeowner's insurance deduction.

I applied for my home loan early in the years and since I claimed at least (1) month of rental income on my previous tax return, the underwriter was able to use 75% of that gross rental amount. But if you have 25% equity in your current residence then the underwriter has the discretion to use up to 95% of the rental income and no Sch E rental income is required. Hope this clears up any questions you may have.

Best of Luck!
  Flag content
Close
Report a Problem

Please enter a valid email address.

Close
Content flagged

We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

Close
We're Sorry
This service is temporarily unavailable. Please come back later and try again.
September 04 2013

If you are living in the property for over a year, then it is not a rental property.  My company would not let you count 'future rents' as income to qualify for a loan.

  Flag content
Close
Report a Problem

Please enter a valid email address.

Close
Content flagged

We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

Close
We're Sorry
This service is temporarily unavailable. Please come back later and try again.
September 04 2013
This doesn't need to be as difficult as it seems. There are guidelines in place for vacating a primary residence that will apply here. Whether it was rented previously is irrelevant if you can show 25% - 30% equity in your current property. Try speaking to someone else. What state are you in?
  Flag content
Close
Report a Problem

Please enter a valid email address.

Close
Content flagged

We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

Close
We're Sorry
This service is temporarily unavailable. Please come back later and try again.
September 03 2013
You may be able to get an exception based on your divorce and the situation there...  It's going to be lender based on this one- 

I'm assuming you need the income from the rental to qualify??

Also, Is the home you're purchasing a larger home??  If not, you'll run into another issue...  They always want to see you moving UP in the world!
  Flag content
Close
Report a Problem

Please enter a valid email address.

Close
Content flagged

We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

Close
We're Sorry
This service is temporarily unavailable. Please come back later and try again.
September 03 2013
Profile picture for Trish1974
I am looking to purchase a primary residence.  The rental, where I'm living now, was purchased 8 years ago as a rental and I have all the past tax returns to prove rental income, with the exception of last year .  I am only living here temporarily due to divorce and it will go back to being a rental once I purchase another house.
  Flag content
Close
Report a Problem

Please enter a valid email address.

Close
Content flagged

We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

Close
We're Sorry
This service is temporarily unavailable. Please come back later and try again.
September 03 2013
Drtrish - I'm assuming since you're living in the home since March 2012, that this is now your primary residence...  What exactly are you trying to do?? Purchase another home or refinance the one you're in...?!

I'm taking a stab here, but it sounds like you're looking to purchase another home, as a primary residence and then offset your payment of your current home with rental income!?  If so, per Fannie Mae guidelines, you can use what's called a "Rent Schedule" when purchasing a new home...

If you could explain further what you're looking to do specifically, it would help us answer the question for you...

Thanks!  Good Luck!
  Flag content
Close
Report a Problem

Please enter a valid email address.

Close
Content flagged

We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

Close
We're Sorry
This service is temporarily unavailable. Please come back later and try again.
September 03 2013
Jim....How are you going to use rental income that does not currently exist.  The lender is correct based on the information that drtrish posted.
  Flag content
Close
Report a Problem

Please enter a valid email address.

Close
Content flagged

We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

Close
We're Sorry
This service is temporarily unavailable. Please come back later and try again.
September 03 2013
Hello Dtrish,  This is not a standard rule among mortgage companies or lenders.  Your Broker/lender was either ignorant or lazy. The ruling on using Rental Income on a "conversion of a current principal residence to Investment property" is: (1) existing residence must have 30% equity; (2) Lender will use 75% of gross rental inocme from newly executed lease agreement - housing payment (PITIA); (3) Proof of receipt of Security Deposit; 1st month's rent & lease Agreement; (4) proof funds deposited into bank.  This is a Fannie May guideline.  As a Sr. Loan Consultant, I would be glad to help if you need assistance.
  Flag content
Close
Report a Problem

Please enter a valid email address.

Close
Content flagged

We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

Close
We're Sorry
This service is temporarily unavailable. Please come back later and try again.
September 03 2013
1. If your 2012 and 2011 show rental income, you have a lease, and deposits to  match they should be able to use the income.
2. IF you are saying there now is no rental income because you occupy 100% of what was once a rental that is another question.
If #2 is correct and you plan to keep this property and move UP in value you could make a case that you are an experienced landlord and they would use 75% of the market rents less PITI

Please clarify your question
  Flag content
Close
Report a Problem

Please enter a valid email address.

Close
Content flagged

We will review this content. Thanks for helping make the site more useful to everyone. To learn more, read Zillow's Good Neighbor Policy.

Close
We're Sorry
This service is temporarily unavailable. Please come back later and try again.
September 03 2013
 
Related Questions
CHILD SUPPORT ARREARS AND HOME LOAN QUALIFICATIONS
Profile picture for mr ayoub323
Latest answer by mr ayoub323
5 hours ago | 9 answers
My husband and I were denied by Wells Fargo for a mortgage
Profile picture for ellisonlisa26
Latest answer by ellisonlisa26
1 day ago | 10 answers
mortgages on single wide mobile homes....is there an easy way to find lenders for this?
Profile picture for Brandon Brown
Latest answer by Brandon Brown
1 day ago | 14 answers
Mortgage with no US tax returns (yet) and foreign income history
Profile picture for Patty  Harrison
Latest answer by Patty Harrison
1 day ago | 4 answers
Can a lender deny your loan when it was their error?
Profile picture for Pasadenan
Latest answer by Pasadenan
1 day ago | 4 answers
Mortgage Rates
 
Be A Good Neighbor

Zillow Advice depends on each member to keep it a safe, fun, and positive place. If you see abuse, flag it. More on our Good Neighbor Policy.