Using property income towards income for loan approval

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Using property income towards income for loan approval

Jonathan BuelowPro Member
Rental Property Investor · WI · Member since 2021 · 22 posts · 9 votes

How can the broker add my prospective property income to my DTI?

I have enough for a downpayment, good credit, and no debt but my income is too low. I understood I could use 75% of the other units' rent to make up for that but, I am being told I need to have 2 years of landlord. Will any lenders look past the landlord and look at the actual number?

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Ryan ThomsonBusiness Member
Real Estate Agent · Colorado Springs, CO · Member since 2018 · 1k+ posts · 1k+ votes
3y

@Jonathan Buelow that can be tough to get around. Some lenders may if you have been declaring it as income on your schedule E in your taxes. 

Not sure if this is helpful at this point, but I had a lender in Colorado Springs tell me that if you rented a home and collected rent from other tenants and paid the landlord the total you could count that as landlord experience. I thought that was interesting. 

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  • Brandon P.
    Lakeland, FL · Member since 2018 · 242 posts · 148 votes
    3y
    Hello Jonathan, pm me your details and I can pass it off to a lender I work with. He might be able to guide you in a good direction.
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  • Michael Blackwell
    Real Estate Consultant · Texas City, TX · Member since 2022 · 7 posts · 10 votes
    3y

    Hey Jonathan,

    Great questions!! From my understanding if you look into mortgage brokers or private lenders they maybe able to work with the income from your property, where as large retail lenders will have strict guide lines that they MUST adhere to. Have you looked into any investor meetups in your area? This would be a great question to pose at a meetup as there are usually people there in your area that will know lenders that have more flexibility.

    Hope this helps!

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  • Ryan ThomsonBusiness Member
    Real Estate Agent · Colorado Springs, CO · Member since 2018 · 1k+ posts · 1k+ votes
    3y

    @Jonathan Buelow that can be tough to get around. Some lenders may if you have been declaring it as income on your schedule E in your taxes. 

    Not sure if this is helpful at this point, but I had a lender in Colorado Springs tell me that if you rented a home and collected rent from other tenants and paid the landlord the total you could count that as landlord experience. I thought that was interesting. 

    The Assumable Guy544 Reviews
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  • Melissa HartvigsenBusiness Member
    Real Estate Agent · Beaverton, OR · Member since 2020 · 190 posts · 158 votes
    3y
    Quote from @Jonathan Buelow:

    How can the broker add my prospective property income to my DTI?

    I have enough for a downpayment, good credit, and no debt but my income is too low. I understood I could use 75% of the other units' rent to make up for that but, I am being told I need to have 2 years of landlord. Will any lenders look past the landlord and look at the actual number?

     Hello @ Jonathan Buelow,

    When a lender/broker is using rental income to help you qualify for the loan, they will either go off the existing lease amounts, or if the units are vacant, they will use the amount the appraiser determines the rental is worth. 

    I have helped several clients (first time home buyers) purchase duplexes or homes with permitted ADUs. They had zero previous experience as a landlord and were able to get a loan where the lender used rental income to help them qualify.

    The two year-requirement to have history as a landlord sounds like an overlay required by the lender/broker you are talking to. It is also possible that your lender is not experienced with investment purchases.  

    I recommend you interview more lenders and brokers to find someone who can do the loan for you. BP has a good directory. You can also get recommendations from your local realtors who work with investors, they will have a relationship with lenders who have successfully helped other clients in your shoes.

    Best wishes for success with your first investment!
    Melissa

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