We frequently have clients that want to keep their current home as a rental while having the luxury of purchasing a new one. We are going to dive into some of the requirements on how to count this new rental income on your loan approval without having any prior renters on the property. You might have even spoken with a lender that denied you on this exact situation or telling you to sell the home if your debt-ratio was to high – this is possible incorrect advice.
Oftentimes if there is a mortgage payment on the property clients can run into debt-to-income ratio problems. This basically means you’re carrying to much debt compared to your gross income. I’m going to break down some basic items to count this new income.
Departure of Current Residence (How To Count Rental Income On A House Your Moving From)
When converting a primary residence to an investment property we will use 75% of gross rental income as stated on the lease as evidence of rental income to offset the payment if the following conditions are met:
- The rental income must be documented with a copy of the fully executed lease agreement
- The receipt of a security deposit from the tenant and deposit into the borrower’s account or held in escrow by the settlement agent
- Meet the minimum reserve requirement this can fluctuate depending on your loan type
This helpful information will allow you to keep the current home while purchasing new. Your Loan Officer will help guide you through this process along with your real estate agent helping facilitate the rental. The projected income will help offset the current mortgage loan lowering your debt ratio. Make sure you work with a knowledgeable loan officer before you start any loan process. Remember experts take the stress out of the process and will ultimately save you time and money.
For more information about our loans, their benefits and loan options and how it may apply to you, please contact us direct at 281-627-4222 or submit the quick quote form on this page.