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Using Rental Income with short rental history for mortgage qualification

I exploring my option for buying house in Charlotte NC. I have couple of rental properties in Texas. My DTI is high with out using Rental income. I have only 4 month of rental history. Can renal income with short rental history be used for qualification of mortgage?
  • November 05 2013 - Charlotte
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Answers (5)

I think there was some confusion in earlier posts.  The 30% equity rule only applies to turning your current home into a rental which does not appear to be the case.
You can use the 4 months of rental income as 75% of your leases.  This is because you purchased the homes in the past year & therefore could not have put them onto your tax returns yet.  
You stated " a couple of rental properties...", if that means 2, you are ok, if it means over 2, then you may run into a "rapid acquisition" issue which essentially says that you are a new investor taking on too much, too fast.
Regards, Rich
  • December 14 2013
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John has it right. One thing he didn't mention though:

You'll need a current fully executed lease agreement for at least 1 year including proof they paid a security deposit if you haven't filed it on your taxes yet.

 
  • November 18 2013
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Based on today's guidelines it seems like you will have a better chance of using rental income once you can show it on your 2013 1040's.  How high is your dti including rental mortgage payments?  Feel free to contact me via my profile if you would like to discuss.

  • November 18 2013
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Greetings to you in Charlotte!  The answer is that you can use new rental income to offset the mortgage and expenses IF you have a large equity position in the property AND depends on the loan type for which you are applying.  For instance, if the Texas rental is worth $100k and you only owe $75k, you have a high probability of being allowed to wash the mortgage with the rental income even though you have only been receiving it for 4 months.  The rental property value will be established by doing a automated valuation of the house by the underwriter to see if house meets the 25% equity required.  If you need any additional advice, feel free to reach me at [spam removed by Zillow moderator due to violation of Good Neighbor Policy].
P.S. - Have you been to the NASCAR headquarters there in Charlotte?  My 4 yr old would love it.  Aloha! Paul  
  • November 05 2013
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If you have not shown 2 years of rental history on your tax returns then the guidelines are as follows:

FHA-To off set the mortgage payment with rental income, you will need to have 25% equity in the property you are renting.  Value will be determined by an appraisal.  No reserve requirements are required for FHA.  If you do not have the equity, you must use the full PITI against you.

Conventional-To off set the mortgage payment with rental income, you will need to have 30% equity in the property you are renting. Value will be determined by an appraisal. 6 months reserves are required.  If you do not have the equity, you must use the full PITI against you.

Feel free to call me at [spam removed by Zillow moderator due to violation of Good Neighbor Policy] if you need futrther clarification.

John Joyce
[Self-promotion removed by Zillow moderator]
  • November 05 2013
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