The lender said that my Debt to income is too high and causing me not to qualify. I rent out my first home. I have a bank account to show that I receive rental income. But the lender is stating that he needs two years. After reading comments on the forum, it looks like my proof of payment to cover mortgage, taxes, insurance should be okay for first year. Should this be a issue?
Do you have a lease agreement that you are able to provide the lender? Is this the subject property that you are trying to refinance, or are you purchasing/refinancing another property?
If you supply a signed lease agreement along with a form 1007 for 1 unit properties, or 1025 for 2-4 unit. This should be enough to use 75% of your rental income to offset the payment. As long as the rental income is approved based on the 1007 or 1025.
Reach out to me with any other quesitons.
I've ran into a similar situation and that's the issue with trying to hold under your personal name. It may be worthwhile to check with another lender. We had one lender tell us that 2yr minimum of rental income only or nothing would count, where we tried another lender who took what we collected so far and averaged it over 24 months - and that helped us get over that hump.
EX: 12 months of rent collected at $1000/mo. = $12000 year. Then the $12000/24 month = $500 of rental income they'd allow us to claim which was enough to help the DTI.
Not sure if this helps but that is what worked for us on our second house hack.
I would try another lender. If you are purchasing a new house and renting out your old house you should be able to consider the rental income, or at least a portion of it, as part of our DTI. Having rental history via a schedule E in your tax returns would help, but an executed lease agreement and proof of security deposit and/or rental income received should suffice.
@Zakiyyah Potts the size of the bank could make a difference as well, if you are going through a large National or regional bank, they are likely going to have hard guidelines. If you can develop a relationship with a community bank or credit union they are more likely to be flexible on their lending requirements. The rate may not be as low but it should steal be decent.