Conventional financing that takes into account rental income?

Private Lending & Conventional Mortgage Advice
7yFollow

Conventional financing that takes into account rental income?

Ryan Daigle
Investor · Apex, NC · Member since 2018 · 253 posts · 215 votes

I've had a few conversations with mortgage brokers and it seems common to NOT count the expected rental income on a property towards your DTI when looking at the loan for that property. That seems to be very limiting given that you're then 100% reliant on your earnings power to qualify you for the loan.

Is not counting the rental income standard? If not, do you have any lender referrals that are willing to count the rental income towards your income when qualifying for the loan?

Thank you!

1Reply
17 views

Most Popular Reply

Darlington Agu
Rental Property Investor · Los Angeles, CA · Member since 2018 · 56 posts · 17 votes
7y

In my personal experience lenders do consider expected income when determining DTI, Im using a Credit Union on my loan and as some have already stated they count 75% of projected rent. Hope this helps

1Reply
See this reply in the discussion

20 Replies

Jump to latestLatest
  • Jerry Padilla
    Lender · Rochester, NY · Member since 2014 · 3k+ posts · 1k+ votes
    7y

    @Ryan Daigle

    That is because you are reaching out to mortgage brokers and many times they have overlays due to the fact that they are reaching out to multiple mortgage companies, and need your loan to comply with multiple different mortgage company’s guidelines.

    You can count 75% of projected rental income.

    1Reply
  • Bill B.
    Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
    7y

    I BELIEVE they want you to have a couple years of landlordign experience before they count 75% or projected rent no questions asked. It can’t be uncommon as I acquired 10 mortgages with a monthly nut of a little over $13k while unemployed/retired and only having my wife’s nursing income. if you don’t count rental income my debt to income ratio is waaaay over 100% maybe 150%. 

    1Reply
  • Justin Kane
    Specialist · San Antonio, TX · Member since 2015 · 909 posts · 297 votes
    7y

    theyre out there, youll have to do more searching, ive found banks and CUs to refi me money within a couple months of ownership and used 75% of our lease agreements towards DTI

    1Reply
  • Ryan Daigle
    OP
    Investor · Apex, NC · Member since 2018 · 253 posts · 215 votes
    7y

    Thanks, all! Sounds like it is an option to have rental income counted, but it might take specialized lenders. I will keep searching 👍

    0Reply
  • Darlington Agu
    Rental Property Investor · Los Angeles, CA · Member since 2018 · 56 posts · 17 votes
    7y

    In my personal experience lenders do consider expected income when determining DTI, Im using a Credit Union on my loan and as some have already stated they count 75% of projected rent. Hope this helps

    1Reply
  • Ryan Daigle
    OP
    Investor · Apex, NC · Member since 2018 · 253 posts · 215 votes
    7y

    @Darlington Agu it does, thank you!

    0Reply
  • Grant Rothenburger
    Investor · Taylor Mill, KY · Member since 2016 · 2k+ posts · 964 votes
    7y

    @Ryan Daigle Talk with local investors or start calling banks! They're out there, just gotta find them.

    0Reply
  • Jimmy Deringer
    Real Estate Agent · Spokane, WA · Member since 2013 · 123 posts · 66 votes
    7y

    I bought my first rental as an owner occupied duplex in Washington and was able to use 75% of the other unit's rent in the formula. If you're in the Northwest I can send you my lender name, otherwise happy investing :)

    0Reply
  • Melvin ListBusiness Member
    Lender · Tampa, FL · Member since 2016 · 1k+ posts · 381 votes
    7y

    @Ryan Daigle lenders are the ones with overlays not brokers.  You can use the rental income so you are speaking with some that probably does not know the guidelines.  I good mortgage broker will have several lenders with ZERO overlays.   

    C2 Financial
    WebsiteView Page
    1Reply
  • Dave Skow
    Lender · Seattle, WA · Member since 2014 · 2k+ posts · 899 votes
    7y

    If purchasing an investment property - the new  expected rental income should be usable  to help offset/ reduce  the new loan debt for the  subject property …...the amount of  income needs to be supported by the appraiser  and  it will also be  reduced by 25%

    0Reply
  • Andrew PostellPro Member
    Lender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
    7y

    @Ryan Daigle if you need a lender that counts income immediately try posting in the state forum.  Assuming your property is in North Carolina, then post it in the North Carolina forum.  There are usually good local people that monitor those forums and they might be able to share who they have used for this sort of thing.  Just an idea.  Good luck!

    1Reply
  • Dawn Burwell
    Rental Property Investor · Overbrook Hills, PA · Member since 2019 · 84 posts · 26 votes
    7y

    @Ryan Daigle. I have run into the same problem

    0Reply
  • Stephanie MedellinBusiness Member
    Mortgage Broker · CA · Member since 2014 · 1k+ posts · 642 votes
    7y
    Originally posted by @Jerry Padilla:

    @Ryan Daigle

    That is because you are reaching out to mortgage brokers and many times they have overlays due to the fact that they are reaching out to multiple mortgage companies, and need your loan to comply with multiple different mortgage company’s guidelines.

    You can count 75% of projected rental income.

     I would say the opposite is true - mortgage brokers typically work with several lenders that don't have overlays.  It's more common for wholesale lenders to have FEWER overlays.

    It's possible that particular broker didn't go to the right lender, but they only need to find one lender with guidelines that will count the rental income.  Not sure why the loan would have to comply with multiple lenders' guidelines when the loan is only going to one lender? 

    [email protected]
    Stephanie Medellin, Loan Factory58 Reviews
    WebsiteView Page
    0Reply
  • William C.
    Real Estate Agent · Souderton, PA · Member since 2016 · 591 posts · 414 votes
    7y

    @Ryan Daigle you are talking to the wrong lenders. Myself and my clients have worked with lenders that use current rental income as a qualifier, as well as expected income on a new purchase. If you still have not had any luck finding the right lender, I’d be happy to help.

    1Reply
  • Ryan Daigle
    OP
    Investor · Apex, NC · Member since 2018 · 253 posts · 215 votes
    7y

    @William C. @Stephanie Medellin @Andrew Postell @Dave Skow @Melvin List thanks for this background! Sounds like I just need to shop around some more.

    1Reply
  • Ty L.
    Investor · Northern Virginia · Member since 2017 · 159 posts · 59 votes
    7y

    @Ryan Daigle I agree with the others.  The lenders are out there.  I believe I used rental income or maybe even projected was used on my last financed deal.  If you keep striking out, let me know and I can recommend someone.

    1Reply
  • Ryan Daigle
    OP
    Investor · Apex, NC · Member since 2018 · 253 posts · 215 votes
    7y

    Thank you @Ty L.!

    0Reply
  • William C.
    Real Estate Agent · Souderton, PA · Member since 2016 · 591 posts · 414 votes
    7y

    FHA loans allow for it. Everyone has heard of FHA. There was also a change made a year or so back that allows homeowners to 'Trailer' their current home, and go buy a new home. Meaning you can rent your house out, use the rental income to "cover" that monthly payment so that you can afford to go purchase a new home with a new loan. There are some caveats, and you'll need cash since you won't be getting proceeds from a sale, but it is possible and it works. Not to mention the investor specific products that some brokers can offer.

    0Reply
  • Ryan Naylor
    Lender · Salt Lake City, UT · Member since 2017 · 77 posts · 76 votes
    7y
    Originally posted by @William C.:

    FHA loans allow for it. Everyone has heard of FHA. There was also a change made a year or so back that allows homeowners to 'Trailer' their current home, and go buy a new home. Meaning you can rent your house out, use the rental income to "cover" that monthly payment so that you can afford to go purchase a new home with a new loan. There are some caveats, and you'll need cash since you won't be getting proceeds from a sale, but it is possible and it works. Not to mention the investor specific products that some brokers can offer.

    I think you can only have one FHA loan out at a time, maybe I'm wrong. I'd have to check, but none the less, for the most part you are correct. the same rule applies, only 75% of the rental income can be counted as income because as investors should be taking 25% into account for needed repairs and maintenance. You can use equity, HELOC and rental income to get the result that you are looking for.

    0Reply
  • Ryan Daigle
    OP
    Investor · Apex, NC · Member since 2018 · 253 posts · 215 votes
    7y

    Just to cap this thread off – yes, most brokers/loan products allow you to count 75% of the expected rent towards your DTI. I have since talked to several that have confirmed this, so it was mostly an isolated case of me not talking to the right people.

    Thank you all for the nudge in the right direction!

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free