How do banks view rental income when financing Duplexes, Triplexes and Quads?

3 Replies

Apologies if this is a question that didn't need to be asked. I could find a clear definitive answer.  

I wondering, when trying to finance a property with an FHA or conventional loan. does the bank take the rental income in to consideration. From what I've heard it looks like they don't. Being that these are residential and not commercial, my the landlords finances are the only focus.

One article stated that if you have a good relationship with the bank, its possible that the underwriter could consider this when working on your loan, but this is not for sure. 

Can anyone share their experience? 

Thanks in advance for everyone time.  

If I remember correctly, they want 2 years landlord experience for rental income to be considered for a non owner occupied rental purchase. If it's going to be owner-occupied, I think they WILL consider the rent for the other units that you won't be occupying. They have their own metrics for what % of market rent they'll use as cashflow/expenses. You'll likely need to produce current leases if there are tenants their already, or they have a form to fill out for an agent to give their opinion on market rent of each unit.

This is all for conventional/fha financing. I haven't done a conventional loan in over 2 years and this could've changed within that time.

@Brandon Heath I must fall into the 'good relationship category' My bank accepted the rent roll from the property I was purchasing to count towards my income. I think it comes down to selling yourself, and your plan to the bank.

Typically for residential property that is 1-4 unit, the lender will underwrite based on conventional/FHA guidelines. They will qualify you based on LTV (loan to value%) DTI (debt to income ratio) personal credit score and assets. Lenders will require at least 6 months reserves based on proposed PITI (principle/interest/taxes/insurance) payment of property your purchasing. Lender may require more to strengthen the loan profile. The loan terms and rate for owner occupancy will be more favorable and non occupied. Talk to your area lender will be your best source of information so you can make the best possible decision. Best of luck on your deal.

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