Can you use a properties current income to qualify?

Question

I was curious if someone with great credit could apply for a mortgage and use the rental income from the property as income?

Chris Mason · Answer

> I was curious if someone with great credit could apply for a mortgage and use the rental income from the property as income?

Ya. It'll be similar in concept to the 50% rule that we like on bigger pockets.

50% rule: rent * 50% - mortgage payment.

What lenders do: rent * 75% - PITIA.

If that calculation yields a positive number, we've got some amount of qualifying income.

If it yields a negative number, we've got a monthly debt obligation.

Note that this is in lieu of "PITIA as monthly debt obligation, period." Meaning that a savvy investor buying cash-flow-positive properties according to the above math will continually have their DTI *decrease* as they buy more and more investment properties.

This has the practical effect of me having investor clients out there that I've done mortgages for already that are "permanently preapproved" for however much cash they have on hand for down payment plus closing costs because while I do not know what their DTI will be, I do know that it will go *down,* meaning that I do not care about it.

Note that the lesser of current lease agreements or appraised market rent will be used, unless you can demonstrate that the current tenant will be departing the residence.

Jassem A. · Answer

Yes most mortgage applications have an area that you enter in rental income

You will typically need 6 months of reserves for every property you own unless it's a commercial loan or equity loan/line