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is there a different preapproval process for a rental property?

i would like to buy a home where i would live and also have a tenant renting the other half.  i already have a tenant prepared to relocate.
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August 07 2013 - Somerville
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Answers (8)

It is different but not by much.  Depending on credit and down payment it will change the approval process.  With FHA you can put as little as 3.5% down and get a 1-4 family rental property.  The catch is it would have to legitimately be your primary residence which it looks like it would be.
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August 08 2013
Hi,
Did you get pre qualify with a mortgage broker already? 

You mention "I would like to buy a home" but, did you know how much money you can afford? Did you know the area that you would like to buy this property? Did you know how much rent you should charge to a prospective tenant? Do you know if this tenant has a good credit and recommendations?

You need to know the touch points that give you the expertise in the real estate field. When a real estate agent represent you, you are depending on someone who has expertise that you do not have.

Best of Luck,

Maria Cipollone
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August 08 2013
Is this a true 2 unit property? Do you own a home now? Etc. There are too many variables for a quick answer. I'd be more than happy to help though.
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August 08 2013
All scenarios I've seen has the lender NOT including the rental income as a means to approve.  As always, contact your local Realtor to assist with these sort of questions. :-)
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August 07 2013
You can't count the rental income when qualifying for a mortgage but everything else remains the same. Contact me with any questions & I would be happy to help you.

GL
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August 07 2013
If this will be your primary residence, lenders will treat the PreApproval process no different. Your estimated future income from renting the other half out will not be able to be used but if you qualify without it, you shouldn't have a problem. Typically, you will need 15% down for a conventional 2 unit mortgage, and 3.5% down for an FHA loan, up to 4 units. This is provided you will be living in one of the units.
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August 07 2013
Most lenders we work with will not count the rental income on the subject property to qualify you, particularly if you do not have prior landlord experience as documented by 2 years of tax returns with Sch E showing rental income.  The prequalification process would generally be the same as with a primary residence.  You may need to write an explanation supporting that you truly are moving into 1/2 and the explanation needs to make sense.  For instance if you own a home near this home and are not selling it, an underwriter may treat the new home as an investment property anyway.  Separately please note that closing costs are higher for 2 unit properties and sometimes down payment requirements can be higher.
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August 07 2013
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They will include 75% of the proposed rental income, if verifiable (a lease) and an arm's length transaction (not a relative).
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August 07 2013
 
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is there a different preapproval process for a rental property?
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