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Replies (8)
- Derek Zasaretti, "Derek_Zasaretti"
- Contributions:343
It may only be a factor if he is trying to use your income to qualify for the loan. Your primary loan officer should be able to tell you whether or not this will raise any flags with the underwriter.
Try to get this info before running his credit
.
Try to get this info before running his credit
.
- Shane Milne, "ShaneTheMortgageMan"
- Contributions:463
Since your husband is on the title of the property that then he technically owns it, and it would need to be disclosed on the loan application, along with any rental income that it gets. If your husband was not on title (nor on the mortgage) then it would not have to be listed on the application since he wouldn't own it.
- lkziemke
- Contributions:9
We are not using my income to qualify, only his income.
His credit has already been run and we've been pre-approved. We even have an accepted offer! The guy doing our loan does not want to have to disclose the rental property since it is not my husband's mortgage, but since you can see rent and mortgage coming in and out of our checking account, he thinks we'll have to disclose everything and that makes him nervous.
I am over the moon with anxiety that we will lose this house.
His credit has already been run and we've been pre-approved. We even have an accepted offer! The guy doing our loan does not want to have to disclose the rental property since it is not my husband's mortgage, but since you can see rent and mortgage coming in and out of our checking account, he thinks we'll have to disclose everything and that makes him nervous.
I am over the moon with anxiety that we will lose this house.
- Shane Milne, "ShaneTheMortgageMan"
- Contributions:463
Intentionally not disclosing real estate you own would be fraud - so while your loan officer may be willing to play around with your situation in hopes of making a buck, you should take the reigns and demand that the property be listed on the loan application since your husband owns it.
So what is the problem with this property? Does the amount of the rental income & expenses put it at a loss and would then disqualify you? If so, did you not want to remove him from the title of the property before your loan officer officially started your application? Did your loan officer not advise you that could be done?
So what is the problem with this property? Does the amount of the rental income & expenses put it at a loss and would then disqualify you? If so, did you not want to remove him from the title of the property before your loan officer officially started your application? Did your loan officer not advise you that could be done?
- lkziemke
- Contributions:9
We certainly are not trying to be dishonest. We gave pushback to the LO, causing him to go forward with disclosing the property, but says he is nervous. The issue is that with the new 75% guidelines for rental income, we take a loss in the eyes of the lender. This may push our debt to income ratio too high. (We are using my husband's base salary only, no commissions, so the %'s are close).
I also read they may require SIX MONTHS of PITI expenses in the bank for the rental property. Well, I'm sorry, but we do not have that by the time we have paid down payment and have reserves for the mortgage we are applying for. 6 months is a ton of money!
Husband has 760 credit and we have everything impeccably documented re: the rental property, and it's been rented without a gap for 5 years.
And NO, no one told us we could remove him from the title!! We can do that? Is it too late?
I also read they may require SIX MONTHS of PITI expenses in the bank for the rental property. Well, I'm sorry, but we do not have that by the time we have paid down payment and have reserves for the mortgage we are applying for. 6 months is a ton of money!
Husband has 760 credit and we have everything impeccably documented re: the rental property, and it's been rented without a gap for 5 years.
And NO, no one told us we could remove him from the title!! We can do that? Is it too late?
- Shane Milne, "ShaneTheMortgageMan"
- Contributions:463
I know you aren't trying to be - it sounds like your loan officer is a little confused on what is right & wrong though, so don't let you be collateral damage of their uncertainty. You were right to stick to your guns.
With FHA financing there are no reserve requirements, you can theoretically qualify for an FHA loan with no money in the bank afterwards. Having reserves can help compensate for shortcomings (such as a high debt to income ratio, or not such great credit).
The "6 months PITI" requirement is only if you are:
1. Financing an investment property
2. Purchasing with conventional financing, vacating your primary residence, have less than 30% equity, and putting less than 20% down (then PMI providers require the 6 months PITI on new & existing)
2. Purchasing with conventional financing, 20% down, less than 30% equity in your primary residence you are vacating, and using Freddie Mac financing (then 6 months PITI on new & existing), or Fannie Mae financing and the findings call for it (it's not always automatic with Fannie Mae financing)
When you are purchasing with FHA financing and using rental income to qualify - if it's reported on the tax returns (Schedule E) then the net rental income will be calculated from there. If it's been rented out starting after the most recent tax filing then FHA uses a "vacancy factor" that depends where the property is, and in Minnesota the vacancy factor is only 10% - so you can use 90% of the rental income contract to help you qualify.
FHA Vacancy Factors & Rental Income Information
As far as removing your husband from the title of the property - most lenders will go by what is owned as per the application date, and your application has already formally begun if you've been disclosed with application/disclosures with the property address on them. This lender may still be OK with removing him now, but I am not sure how accurate the information would be from your loan officer on that.
I feel your best course of action is proceed as it is currently, but make sure your loan officer is really reading the guidelines so they know how much rental income to use, etc. so your file looks as positive as it can when it gets to the underwriter.
With FHA financing there are no reserve requirements, you can theoretically qualify for an FHA loan with no money in the bank afterwards. Having reserves can help compensate for shortcomings (such as a high debt to income ratio, or not such great credit).
The "6 months PITI" requirement is only if you are:
1. Financing an investment property
2. Purchasing with conventional financing, vacating your primary residence, have less than 30% equity, and putting less than 20% down (then PMI providers require the 6 months PITI on new & existing)
2. Purchasing with conventional financing, 20% down, less than 30% equity in your primary residence you are vacating, and using Freddie Mac financing (then 6 months PITI on new & existing), or Fannie Mae financing and the findings call for it (it's not always automatic with Fannie Mae financing)
When you are purchasing with FHA financing and using rental income to qualify - if it's reported on the tax returns (Schedule E) then the net rental income will be calculated from there. If it's been rented out starting after the most recent tax filing then FHA uses a "vacancy factor" that depends where the property is, and in Minnesota the vacancy factor is only 10% - so you can use 90% of the rental income contract to help you qualify.
FHA Vacancy Factors & Rental Income Information
As far as removing your husband from the title of the property - most lenders will go by what is owned as per the application date, and your application has already formally begun if you've been disclosed with application/disclosures with the property address on them. This lender may still be OK with removing him now, but I am not sure how accurate the information would be from your loan officer on that.
I feel your best course of action is proceed as it is currently, but make sure your loan officer is really reading the guidelines so they know how much rental income to use, etc. so your file looks as positive as it can when it gets to the underwriter.
- lkziemke
- Contributions:9
Thank you so, so, SO much for all of that information, Shane! That was so helpful to us.
I have to admit that at this point, I am feeling under-confident about our LO. I feel like we may be too far down the pike to switch at this point, not to mention that there aren't gobs of LOs out there willing to write 203(k) rehab loans and HomePath reno loans (We may end up switching financing on Monday--it's cheaper), and he has experience. But we are going to need to sit right on top of him for the rest of this process, I think. We've had to really drill down to get straight answers on how things are likely to shake down, and I think the bottom line is that he really just doesn't usually know the answers to the questions we're asking. We'll make sure that if he doesn't know, he finds out!
Thanks again for your help, Shane!
I have to admit that at this point, I am feeling under-confident about our LO. I feel like we may be too far down the pike to switch at this point, not to mention that there aren't gobs of LOs out there willing to write 203(k) rehab loans and HomePath reno loans (We may end up switching financing on Monday--it's cheaper), and he has experience. But we are going to need to sit right on top of him for the rest of this process, I think. We've had to really drill down to get straight answers on how things are likely to shake down, and I think the bottom line is that he really just doesn't usually know the answers to the questions we're asking. We'll make sure that if he doesn't know, he finds out!
Thanks again for your help, Shane!
- Shane Milne, "ShaneTheMortgageMan"
- Contributions:463
You are welcome - you are right renovation loans are tougher to find loan officers for, but just stick with what you have going and make the best out of it. If there is a way for you to qualify they should be able to figure it out. This is the link to the FHA handbook, which are the "master" guidelines so to speak - but lenders can have overlay guidelines on top of them.
Wife owns rental property. Husband wants to buy home. How does this work?
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