Rental income consideration for traditional finance
Arlington, TX · Member since 2022 · 15 posts · 5 votes
I still have a few things to square up before I start looking for properties but recently learned that traditional lenders will only consider rental income after 2 years of being a land lord. I was at a real estate meetup and met this guy who explained a reg D 506b (I think it's the same as a syndication??). He mentioned if I invested with them then I would get a residual as well as tax benefits according to the capital I put in. Their plan was 5 or so years so the money would be invested for at least the 2 years. My question is if my capital is tied up in that investment, will that count for the 2 years of "being a land lord" and the distributions I would get count toward my qualifying income?
Hey James!
I am a mortgage consultant for Wells Fargo. You are correct on the using the income after 2 years, however, if you have a lease agreement and or it is on the tax returns (hence at least a few months or a year of income) you can still use the income to offset the PITI payment just nothing above and beyond this. This will still help with your DTI.
I have no knowledge on the 2nd part of the post LOL just wanted to confirm this for you!
Hey James!
I am a mortgage consultant for Wells Fargo. You are correct on the using the income after 2 years, however, if you have a lease agreement and or it is on the tax returns (hence at least a few months or a year of income) you can still use the income to offset the PITI payment just nothing above and beyond this. This will still help with your DTI.
I have no knowledge on the 2nd part of the post LOL just wanted to confirm this for you!
Hey James!
I am a mortgage consultant for Wells Fargo. You are correct on the using the income after 2 years, however, if you have a lease agreement and or it is on the tax returns (hence at least a few months or a year of income) you can still use the income to offset the PITI payment just nothing above and beyond this. This will still help with your DTI.
I have no knowledge on the 2nd part of the post LOL just wanted to confirm this for you!
Thanks!!! So basically the property would have to already have tenants in order for me to use it to offset my DTI right? I don't see any other way I would have a signed lease agreement for a property I don't yet own. also, I've heard of some banks taking a portion of future rental income to aid in qualifying. Is this true at all?
Hey James!
I am a mortgage consultant for Wells Fargo. You are correct on the using the income after 2 years, however, if you have a lease agreement and or it is on the tax returns (hence at least a few months or a year of income) you can still use the income to offset the PITI payment just nothing above and beyond this. This will still help with your DTI.
I have no knowledge on the 2nd part of the post LOL just wanted to confirm this for you!
Thanks!!! So basically the property would have to already have tenants in order for me to use it to offset my DTI right? I don't see any other way I would have a signed lease agreement for a property I don't yet own. also, I've heard of some banks taking a portion of future rental income to aid in qualifying. Is this true at all?
No problem! Usually they can use the appraisal report that will state the rental comparisons and they can use a % of this for the subject property. In regards to future potential properties, once you own property (that isnt a full 2 years of ownership) then they will be able to offset the full amount of PITI to qualify for you for the potential new mortgage. Even if they wont give additional income on top which might seem small but can help significantly.
Does that make sense?
Hey James!
I am a mortgage consultant for Wells Fargo. You are correct on the using the income after 2 years, however, if you have a lease agreement and or it is on the tax returns (hence at least a few months or a year of income) you can still use the income to offset the PITI payment just nothing above and beyond this. This will still help with your DTI.
I have no knowledge on the 2nd part of the post LOL just wanted to confirm this for you!
Thanks!!! So basically the property would have to already have tenants in order for me to use it to offset my DTI right? I don't see any other way I would have a signed lease agreement for a property I don't yet own. also, I've heard of some banks taking a portion of future rental income to aid in qualifying. Is this true at all?
No problem! Usually they can use the appraisal report that will state the rental comparisons and they can use a % of this for the subject property. In regards to future potential properties, once you own property (that isnt a full 2 years of ownership) then they will be able to offset the full amount of PITI to qualify for you for the potential new mortgage. Even if they wont give additional income on top which might seem small but can help significantly.
Does that make sense?
Everything down until the last sentence made perfect sense!!! That last statement has me a bit confused.
Hey James!
I am a mortgage consultant for Wells Fargo. You are correct on the using the income after 2 years, however, if you have a lease agreement and or it is on the tax returns (hence at least a few months or a year of income) you can still use the income to offset the PITI payment just nothing above and beyond this. This will still help with your DTI.
I have no knowledge on the 2nd part of the post LOL just wanted to confirm this for you!
Thanks!!! So basically the property would have to already have tenants in order for me to use it to offset my DTI right? I don't see any other way I would have a signed lease agreement for a property I don't yet own. also, I've heard of some banks taking a portion of future rental income to aid in qualifying. Is this true at all?
No problem! Usually they can use the appraisal report that will state the rental comparisons and they can use a % of this for the subject property. In regards to future potential properties, once you own property (that isnt a full 2 years of ownership) then they will be able to offset the full amount of PITI to qualify for you for the potential new mortgage. Even if they wont give additional income on top which might seem small but can help significantly.
Does that make sense?
Everything down until the last sentence made perfect sense!!! That last statement has me a bit confused.
Basically, the income on current rentals may not be used if its not 2 years of income, BUT they can still use the rent to cancel the PITI payment so you may not be receiving income but you wont be getting hit for the debt.
Hey James!
I am a mortgage consultant for Wells Fargo. You are correct on the using the income after 2 years, however, if you have a lease agreement and or it is on the tax returns (hence at least a few months or a year of income) you can still use the income to offset the PITI payment just nothing above and beyond this. This will still help with your DTI.
I have no knowledge on the 2nd part of the post LOL just wanted to confirm this for you!
Thanks!!! So basically the property would have to already have tenants in order for me to use it to offset my DTI right? I don't see any other way I would have a signed lease agreement for a property I don't yet own. also, I've heard of some banks taking a portion of future rental income to aid in qualifying. Is this true at all?
No problem! Usually they can use the appraisal report that will state the rental comparisons and they can use a % of this for the subject property. In regards to future potential properties, once you own property (that isnt a full 2 years of ownership) then they will be able to offset the full amount of PITI to qualify for you for the potential new mortgage. Even if they wont give additional income on top which might seem small but can help significantly.
Does that make sense?
Everything down until the last sentence made perfect sense!!! That last statement has me a bit confused.
Basically, the income on current rentals may not be used if its not 2 years of income, BUT they can still use the rent to cancel the PITI payment so you may not be receiving income but you wont be getting hit for the debt.
Got it!!!!! It basically cancels out. Thanks again for sharing this info!!!