House Hackers, how do you secure your next conventional loan?

Question

Help! I have all the rooms in my current property under 12 month leases and am under contract for another property but the lenders keep falling through because they won't accept room rentals to count towards income. How are y'all getting around this?

Liang Xu · Answer

I had to call around a few banks before I found someone that would take 75% of the rental income to count towards the property. I'd say don't give up on calling! Local banks and credit unions are your best bet.

Also you can look to getting a cosigner to sign. If you have a family member onboard having them cosign with you will be a massive boost to get that income up to qualify you for a loan.

Looking for a DSCR loan could be another good option since now you don't need to rely on your personal income to qualify but the cash flow of the property.

Rick Albert · Answer

What does it show on your tax return? Sometimes they can use it instead of leases.

Ask your lender if they will accept a master lease. I've never tried this, but in theory if there is a master lease, there can be sub-leases (each room). I know organizations do this but need to make sure it is on the up and up.

Seph Hancock · Answer

This is one of the biggest challenges house hackers run into when trying to scale with conventional financing.

Most traditional lenders do NOT like counting individual room rents unless there’s a documented history they can easily validate on tax returns or leases structured in a way they recognize.

A few things investors commonly do to solve this:

• Use lenders familiar with house hacking and non-traditional rental setupsSome local banks, credit unions, DSCR lenders, and investor-focused brokers understand room-rental models much better than standard retail lenders.

• Season the incomeMany lenders want to see the rental income reflected on tax returns before they’ll fully count it.

• Convert to standard unit leases if possibleConventional underwriting is usually much cleaner with unit-by-unit leases versus separate bedroom leases.

• Increase documented income another waySome investors qualify using W2 income, business income, partner income, or reserves while the portfolio seasons.

• Look into DSCR options for the next propertyDepending on the property and occupancy setup, DSCR financing can sometimes bypass personal income limitations entirely.

The biggest mistake is assuming all lenders underwrite investor income the same way.

They absolutely don’t.

A lender that mainly handles retail homebuyers may kill a deal that an investor-focused lender could approve in a week.

Bryan Maddex · Answer

Some decent info from other replies but some gaps in the replies. Fannie allows you to use room rentals, but not until you are an experienced investor which is defined as 12 months rental income on your last filed tax return.Some lenders will object (lender overlay), but it is not against guidelines. Room rental income on the house you are purchasing is called Border Income and is not allowed for most purchases. On the exiting property, you can only use 75% of the lease agreements. DSCR loans are not an option if you are "house hacking" as that generally means you are renting rooms in a property that you purchased and live in. Also, 98% of DSCR lenders do NOT recognize room rentals.  If you get a Master Lease that has all room renters on one lease agreement, you can get around this. There are about 1/2 a dozen DSCR lenders that do allow room rentals. Some of those lenders only will allow this income if you are renting on Padsplit platform.

Jay Hurst · Answer

Lenders absolutely will count the income if the income is showing up on a tax return. The only time leases are asked for is if the property is not on the latest tax return due to when the property was purchased.  So, renting by room.short term rental income is no different then long term rental income once the income is  reported on the tax returns.  and depreciation, property taxes, insurance and mortgae interest will be added back in all cases.

Becca Buth · Answer

Thank you! I may need to go the DSCR route, was hoping to not put 20% down on this property though.

Jay Hurst · Answer

have you filed your 2025 tax returns?  if the income was on the tax returns you would be able to use that income.

Didier Bizimungu · Answer

Have them sign a master lease with all of them on the name.

House Hackers, how do you secure your next conventional loan?

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