Mortgage qualification, new investor

1 Reply

I am wondering about mortgage qualification parameters on investment properties. Do banks assess the rental income potential on a property when they qualify you? In other words, I hear all these stories about people buying multiple properties in one year (not that this is my goal), and getting multiple mortgages over that one year span of time.

I am only familiar with owner-occupied real estate, where the bank qualifies you based on your gross income against all debt payments (i.e., front and back end ratios). I've only ever owned one home at a time.

For investment properties, do banks actually consider potential rent as income?  I am just trying to figure out how a people with limited means initially get multiple mortgage approvals--my only thought is that the banks must consider the potential cash flow on each given property.

Any advice on how the mortgage approval process works would be much appreciated.  Thanks all!

You won't really be able to get government-backed loans with rental income, they can only use 75% of the rental income the first couple years you own it. So you have to talk to local banks with commercial loans, pretty much. They will certainly consider rental income as qualifiable income, but not all of them will add back depreciation which is what makes your net income about break even and useless for qualifying for loans.

I've been self-employed in real estate for a few years now and I'm only now starting to be able to get banks to see me as low enough risk to write loans. I flipped a few houses a year, wholesaled, etc, and they still would tell me my debt to income ratio is too high. Frustrating.

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here