My customer is purchasing a new primary residence and plans to rent out their current home. Can we use the rental income for qualification?
For borrowers who are purchasing a new primary residence, and intend to convert their existing primary residence to an investment property, rental income may be utilized to offset the existing mortgage payment for Conventional products provided the following requirements are met:
- Rental income may only be used to qualify when mortgage insurance is not required.
- Net rental income is calculated utilizing 75% of the projected rental income, less the proposed PITIA.
- The borrower must have at least 30% equity in the existing primary residence as documented via a full Uniform Residential Appraisal Report (IRAR) with interior/exterior inspections: minus any outstanding liens. If the 30% equity in the property cannot be documented, rental income may not be used to offset the mortgage payment and the following requirements apply:6 month of PITIA reserves for both properties is required.
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Both the current and the proposed mortgage payment must be used to qualify the borrower for the new mortgage transaction.
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The rental income must be documented via a fully executed lease agreement, and the receipt of a security deposit from the tenant and deposit into the borrowers account.
For FHA products, rental income from the property being vacated may not be considered in the underwriting analysis except under the following circumstances:
- Sufficient Equity in Vacated Property: The borrower has at least 25% equity in the principal residence being converted to an investment property as determined by either:
- A current residential appraisal, dated within 6 months of the application.
- Comparing the unpaid principal balance to the original sales price of the property.
In these instances, rental income from the property being vacated reduced by the appropriate vacancy factor must be documented via:
- A properly executed lease agreement signed by the borrower and the lessee of at least on year's duration after the loan is closed.
- Evidence of the security deposit and/or evidence of the first month's rent was paid to the borrower.
Contact Kari A. Battaglia, PA GRI SRES® , licensed Realtor® in Venice Florida at 941-270-1851 to list your home, answer general questions or to help you search for homes for sale in Venice Florida. I currently serve customers in Venice Florida, Englewood Florida, Nokomis Florida, South Venice, Laurel, Osprey and Casey Key and Manasota Key communities. As a private landowner, I also have Tennessee properties available in the Chattanooga area. Call or email me to receive a list of Tennessee properties available for sale.
Contact me by email at Kari@DiscoverVeniceRealEstate.com. Need information fast, call me direct at 941-270-1851. Copyright©2009. By Kari A. Battaglia PA. All Rights Reserved.
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Serving customers in Venice Florida, South Venice, Osprey, Nokomis Florida, Casey Key, Manasota Key, Englewood Florida, Rotonda West and North Port communities. Call me to list your home for sale, answer questions regarding steps you can take to AVOID FORECLOSURE or answer any general questions you may have about real estate.
Contact me by email at Kari@BuyAHomeInVENICE.com. Need information fast, call me direct at 941-270-1851. Copyright©2010. By Kari A. Battaglia PA. All Rights Reserved.
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