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Would rental income be considered?

I purchased a rental property with cash in 2012 and started renting it in 2013. Is there any lender who would consider this as income if I try to refinance my primary home? I heard people say no since it won't be on my 2012 income tax return. But this is not a home converting to rental. It was purchased as an investment property. Does any one know such lender?
  • March 25 2013 - Hercules
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Answers (5)

Lease agreements and verification of cancled rent checks from the tenants.
  • March 26 2013
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Profile picture for Roseville Loan Guy
The answer is: probably. 

You DO NOT have to have rental income showing on a tax return to use it as income. Otherwise it would be even harder than it already is to qualify to buy income property.

In your specific situation lease agreements should be able to be used. If you don't have a history of owning other rental property, and maybe even if you do, the lender may also ask for bank statements or cancelled checks showing the tenant's deposit as well as the regular monthly payments they have been making from the time they moved in until now.

In my opinion it should be pretty simple so long as you can provide those documents.

Greg
  • March 26 2013
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from Fannie Mae:

purchase:

If the property is not currently rented, lease agreements are not required. Lenders may use market rent supported by Form 1007 or Form 1025, as
applicable.

refinance:
If the borrower is able to document that the rental property was not in
service the previous tax year, or was in service for only a portion of the previous tax year, the lender may determine qualifying rental income by using:

• Schedule E income and expenses, and annualizing the income (or loss) calculation;
OR
• lease agreement(s) to determine the gross rental income to be used in the net rental income (or loss) calculation.
  • March 26 2013
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I trust this gives you the information you are looking for...

Rental Income on Subject Property

Purchase:
o The borrower cannot use rental income from the subject property to qualify.

Refinance:
o Rental Income may be used to qualify ONLY if reported on most recent years filed federal tax return, OR

o If property was acquired after the last tax filing year, a copy of the fully executed lease agreement along with proof of 3 months receipt of rental income is provided. Acceptable proof of receipt of income can be cancelled checks and/or bank statements.
  • March 26 2013
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Profile picture for Academy Mortgage AZ
You generally need to have at least two years of documented history of rental income to use it to qualify for a mortgage. Are you trying to refi the rental or your primary residence? Thanks, Julio
  • March 25 2013
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