Using Future Rental Income to Qualify (House Hack)

[Ezra Kim]

Hi Everyone,

I'm thinking about purchasing my first property in the next maybe 1-3 years as a house hack. My understanding is that lenders will allow to add a portion of the future rental income (75%) of the subject property towards your qualifying income when they calculate your DTI. My question is do lenders use the lesser of market rents and actual contractual rents? Some sources I read online say lenders will consider market rents determined by appraiser but others say that they take the lesser of that and existing leases. Does the answer change if the leases are month-to-month?

In Southern California, most of the entry level 2-4 unit properties have existing leases that are much less than the market. The properties that I would be able to purchase changes drastically if I'm only able to use a portion of the contractual rents to qualify.