Will lender use potential rental income?

Question

Hi everyone!

I am planning to buy a multi family property in Reno, NV and i am curious to know if lender will count rent income from the property.

I am planning to occupy one of the units and i am hoping that income from 3 other units can be counted towards by income.

I read that usually lenders consider 75-80% of that income. The weird part is that it usually states that i have to provide the proof of that income, but how can I prove if I did bought it yet?

Have you done something like that? Also, what do you think about Reno?

Eileen L. · Answer

The current lease should work for your lender.  Just ask the seller’s agent to provide a copy of the lease agreements for each tenant. Hope that helps!

Braydin Mehnert · Answer

Hi Ihor,

The lender will use a form 1025 that is provided by the appraiser for your upcoming purchase. Within that appraisal the appraiser will determine the fair market rents for all units. The lender will assume that you will occupy the one with the lowest rent, and give you credit for 75% of the gross monthly rent for the remaining unit(s).

Happy to show an example from a recent transaction if needed!

Basit Siddiqi · Answer

Lenders normally require you to provide a lease agreement + 2 years of tax reporting to start reporting your rental income for DTI purposes.

Upen Patel · Answer

He is buying owner occupied. Can't do a DSCR transaction. Those are only for investment.

Upen Patel · Answer

@Ihor Onyshchenko Yes, you can use rental income to help you qualify. If the units are currently rented, then we would ask for the lease from the seller. If the unit(s) are vacant, then we will use the rental information provided on the appraisal.

Angie Castro · Answer

If you are going to live in one of the units I'm guessing you are doing an FHA loan? Fha loans allow up to 4 units and conventional loans only up to two units. We either of those the lender will not count the rental income but depending on the type of loan (fha you have to be in it for two years) You could move out and then use the rental income. At that point you can get another loan for your primary home.

Eliott Elias · Answer

If you’re using a non qualifying loan like a DSCR they will look to see your mortgage payment is less than your rents

Ihor Onyshchenko · Answer

Right, I understand that. What I want is the income from the property ( that I am about to buy) would be also counted towards my income when applying to financing for that same property.

Malcomb Stapel · Answer

@Ihor Onyshchenko  proof would be the tax returns you have on file after the first year of ownership.

Will lender use potential rental income?

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