Weekly Mortgage Memo
Today’s Topic: Rental Income
Sometimes our clients want to rent their primary residence and buy a new home. They generally
assume they can count the rental income to offset their mortgage payment. That was the case
prior to 2008 but since then it’s gotten much tougher. If they can’t count the rental income it
can be tough on the ole’ debt to income ratio (DTI) for our client to have two house payments
counted against them. Here then is the matrix (imagine that) of what has to happen for our
client to count future rental income from their current residence.
_________________________________________________________________________________
Loan Type Documented equity in Result Reserve Requirement
their existing property
|
|
|
| Fannie/Freddie (Conventional) |
Less than 30% |
No Rental Income Counted. |
6 months payments on both homes. |
| 30% or Greater |
75% of rental income can be used. |
2 months payments on both homes. |
|
|
| FHA |
Less than 25% |
No Rental Income Counted. |
No requirements |
| 25% or More |
75% of rental income can be used. |
No requirements |
|
| Veterans Administration |
No requirement |
75% of rental income can be used |
No requirements |
|
| HUD184 (Native American) |
25% equity |
Can’t use rental income. Qualify with both payments and document previous home rented. |
No Requirements |
|
|
|
|
|
| USDA – Rural Dev |
Nothing documented but they really frown on this. |
|
|
|
| Notes: |
|
|
|
Liquid assets. Checking, savings, stocks, bonds and retirement accounts. |
|
|
|
Generally speaking this is either 1)appraisal or 2) price they purchased the home. |
| |
|
|
If the borrower is relocating or being transferred by their current employer FHA will accept rental income from home their leaving without any equity requirements.
|
|
_____________________________________________________________________________________
Info provided by Tom Davies
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Taylor Ortiz
Mortgage Loan Officer
Edmond Mortgage
2575 S Kelley Pointe Parkway Suite #180,
Edmond, OK 73013
Office phone: 405-513-7805
Mobile phone: 405-509-1064
NMLS# 449866
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