Looking for lenders who will count rental income before 2 years

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Looking for lenders who will count rental income before 2 years

Anthony BecerraPro Member
Colorado Springs, CO · Member since 2015 · 16 posts · 6 votes

I’m looking for advice on finding lenders who will count rental income from a property that has been operating as a rental for less than two full years.

Here’s my situation:

  • - I purchased the property in 2024 as an owner-occupied property.

  • - It’s a 3-bedroom townhome, and I initially lived in one bedroom while renting out the other two rooms.

  • - I lived there for one year.

  • - After one year, I moved out and converted it to a fully rented property.

  • - It is now rented by the room to three separate tenants, each with their own lease.

  • - The property has been continuously generating rental income since I purchased it, but it has only been a fully non-owner-occupied rental for about one year.

  • - I have leases documenting the current rental income.

The issue I’m running into is that some lenders are telling me they need to see two full years of rental history/tax returns before they will count the rental income toward qualifying.

I’m wondering if anyone here has experience with lenders who will consider rental income in a situation like mine, where:

  1. 1. The property was owner-occupied for the first year but had two paying tenants during that period.

  2. 2. It has subsequently been fully rented for approximately one year.

  3. 3. There are three separate leases and documented rental income.

  4. 4. The property has been operating as a rent-by-the-room rental rather than a traditional single-tenant lease.

Would an investment/portfolio lender, DSCR lender, non-QM lender, or local bank/credit union be more flexible with this?

I’m particularly interested in lenders who may be willing to use the current leases and/or an appraisal with market-rent documentation (1007/1025) rather than requiring two years of Schedule E history.

If you’ve successfully financed a similar rent-by-the-room property, I’d really appreciate hearing what type of lender you used and what documentation they required.

Thanks!

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Member since 2026 · 1 post · 2 votes
3w

Hey Anthony,

​You’re running into a classic retail bank overlay—conventional lenders often demand two full years of Schedule E history, but you definitely have options in the Non-Agency/Non-QM space that don't require that track record.

​The main hurdle you’re facing is that traditional underwriting strictly evaluates a single-family townhome as a single-family lease, which is why they get stuck on the room-by-room setup. Here is how you can bypass the 2-year Schedule E requirement:

​1. DSCR (Debt Service Coverage Ratio) Loan — The Easiest Fix

  • ​How it solves the 2-year rule: DSCR loans qualify the property based on the cash flow of the asset, not your personal tax returns or personal DTI. No 2-year landlording history or tax returns are required.

  • ​How to handle rent-by-the-room: Instead of using your three separate room leases, a DSCR underwriter orders an appraisal with a Form 1007 Single-Family Rent Schedule. The appraiser determines the fair market rent for the entire 3-bedroom townhome as a single unit. As long as that appraised market rent covers the property's PITIA (debt service), the loan qualifies.

​2. 12-Month Bank Statement Non-QM Loan

  • ​How it solves the 2-year rule: If you need to qualify based on personal income and want credit for the actual higher cash flow generated by the room-by-room strategy, Non-QM bank statement loans look at your trailing 12 months of bank deposits rather than tax returns.

  • ​How to handle rent-by-the-room: You provide 12 consecutive months of bank statements showing the tenant deposit transfers matching your three executed leases. The underwriter uses the actual trailing 12-month deposit average as your qualifying income.

​Recommendation:

Reach out to an independent mortgage broker or lender specializing in DSCR and Non-QM products. If the standard market rent for a 3-bedroom townhome in your area covers your mortgage payment, a DSCR loan with a 1007 appraisal will be your fastest and most painless path to closing.

​Hope this helps, and good luck expanding the portfolio

See this reply in the discussion

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  • Member since 2026 · 1 post · 2 votes
    3w

    Hey Anthony,

    ​You’re running into a classic retail bank overlay—conventional lenders often demand two full years of Schedule E history, but you definitely have options in the Non-Agency/Non-QM space that don't require that track record.

    ​The main hurdle you’re facing is that traditional underwriting strictly evaluates a single-family townhome as a single-family lease, which is why they get stuck on the room-by-room setup. Here is how you can bypass the 2-year Schedule E requirement:

    ​1. DSCR (Debt Service Coverage Ratio) Loan — The Easiest Fix

    • ​How it solves the 2-year rule: DSCR loans qualify the property based on the cash flow of the asset, not your personal tax returns or personal DTI. No 2-year landlording history or tax returns are required.

    • ​How to handle rent-by-the-room: Instead of using your three separate room leases, a DSCR underwriter orders an appraisal with a Form 1007 Single-Family Rent Schedule. The appraiser determines the fair market rent for the entire 3-bedroom townhome as a single unit. As long as that appraised market rent covers the property's PITIA (debt service), the loan qualifies.

    ​2. 12-Month Bank Statement Non-QM Loan

    • ​How it solves the 2-year rule: If you need to qualify based on personal income and want credit for the actual higher cash flow generated by the room-by-room strategy, Non-QM bank statement loans look at your trailing 12 months of bank deposits rather than tax returns.

    • ​How to handle rent-by-the-room: You provide 12 consecutive months of bank statements showing the tenant deposit transfers matching your three executed leases. The underwriter uses the actual trailing 12-month deposit average as your qualifying income.

    ​Recommendation:

    Reach out to an independent mortgage broker or lender specializing in DSCR and Non-QM products. If the standard market rent for a 3-bedroom townhome in your area covers your mortgage payment, a DSCR loan with a 1007 appraisal will be your fastest and most painless path to closing.

    ​Hope this helps, and good luck expanding the portfolio

    • Anthony BecerraPro Member
      OP
      Colorado Springs, CO · Member since 2015 · 16 posts · 6 votes
      3w

      Thank you for guiding me in the right direction!

    • Rental Property Investor · Saint Petersburg, FL · Member since 2018 · 114 posts · 68 votes
      1w

      I use the DSCR one lease route for mine

  • Stacy RaskinBusiness Member
    Lender · Member since 2022 · 1k+ posts · 508 votes
    3w

    Are you looking to refinance the property or what kind of loan are you looking to do? Happy to connect to discuss further.

    • Anthony BecerraPro Member
      OP
      Colorado Springs, CO · Member since 2015 · 16 posts · 6 votes
      3w

      Sorry for not clarifying enough. I’m actually not looking to refinance the current property. I’m trying to figure out how I can finance my second property with 3.5% down while having the rental income from my first property count toward qualifying.

      From what I've found so far, it seems like my options may be to increase my income, partner with someone, find a seller-financed deal, or wait until I can save 15–20% down for a DSCR loan or potentially qualify for a 12-month bank-statement Non-QM loan.

      If I'm missing any other ideas, I'd be happy to hear them. Thank you!

    • Rental Property Investor · Fairfield, CT · Member since 2019 · 26 posts · 7 votes
      14h

      I've found going the creative finance options like seller financing or Subto work well for me. Let me know if you have any questions.

  • Tim SwierczekPro Member
    Lender · White Bear Township, MN · Member since 2016 · 1k+ posts · 1k+ votes
    3w

    this is possible through several different loan programs. Please reach out if you’d like to get some options.

  • Lender · Denver, CO · Member since 2021 · 41 posts · 11 votes
    3w

    @Anthony Becerra I just sent you a DM. I'm a local DSCR lender and would be happy to have a conversation and get you on the right track to refinancing this property. The issues you're running into are bank issues. Hope to chat soon!

  • Lender · Peoria, AZ · Member since 2026 · 22 posts · 7 votes
    3w

    Anthony, you’re hitting a common retail/conventional overlay. Two full years of Schedule E is a bank-style income test, not the only way to underwrite a cash-flowing rental.

    Two paths that usually skip the 2-year landlording history:

    1) DSCR — qualifies off the property, not personal DTI or Schedule E. For a 3-bed townhome many DSCR desks will use an appraisal 1007 market rent for the whole unit as a single SFR lease (not three room leases). If that market rent covers PITIA at their DSCR floor, the room-by-room structure is less of a blocker.

    2) 12-month bank-statement / Non-QM — if you want credit for the higher room-rent cash flow, some Non-QM programs use trailing 12 months of deposits tied to the executed leases instead of two years of tax returns.

    Portfolio/local CU can work too, but overlays vary a lot. Clarify whether this is a cash-out/refi vs purchase of the next one, and what LTV/credit band you're in. That changes which desk is realistic. Good luck.

    • Anthony BecerraPro Member
      OP
      Colorado Springs, CO · Member since 2015 · 16 posts · 6 votes
      2w

      Hey Joe,

      This is for the purchase of my next property, not a refinance.

      Here are some more details:

      • Current mortgage balance: ~$412,000

      • Estimated current home value: $415,000–$425,000

      • Estimated current LTV: ~97%–99%

      • FICO credit score: 793

  • Member since 2026 · 19 posts · 11 votes
    3w

    Anthony, I think there's a little more information needed here before I'd start looking for a DSCR or Non-QM lender.

    What are you actually trying to finance?

    Are you trying to refinance this townhome, or are you trying to qualify for the purchase of another property and need the rental income from this townhome to help you qualify?

    I'm guessing it's the second one from the way you wrote the post, but that's an important distinction.

    I'd also want to know what you owe on the townhome, approximately what it's worth today, what your current mortgage payment including taxes, insurance and HOA is, and how much you're collecting from the three tenants.

    The reason I'm asking is that I'm not convinced your problem is necessarily that you need to find some specialized lender willing to accept less than two years of rental history.

    Two years isn't a universal requirement in every conventional rental-income situation.

    You've owned the property since 2024, you've actually been collecting rent during your ownership, and you've now operated it entirely as a rental for approximately a year. Depending on the exact dates, documentation and what you're trying to finance, there may be a conventional way to deal with this.

    The rent-by-the-room arrangement is something I'd want the lender to look at carefully, though. This is still a single townhome, not a three-unit property just because you have three separate leases.

    I'd want to see how the income has been reported on your tax returns, the leases, evidence of the rents actually being deposited, and what market rent for the property is as a traditional single-family rental.

    And before refinancing the existing property, I'd want to know why we're refinancing it.

    If you bought it owner-occupied in 2024, you may already have financing that is considerably more attractive than what replacing it with an investment-property or DSCR loan would cost you today.

    I wouldn't give up a good first mortgage simply because somebody told me I needed a DSCR loan to recognize the rental income.

    If your real objective is buying another property, then let's solve that problem first.

    How much income do you need from this property to qualify for the next purchase? Does the rental income simply need to offset the existing housing payment, or do you actually need positive rental income added to your qualifying income?

    Those are two very different things.

    So before shopping for another lender, I'd answer these questions:

    What are you trying to buy or refinance?

    What is the townhome worth?

    What do you owe on it?

    What is the complete monthly payment including HOA?

    What are the three tenants paying?

    How long have the current leases been in place?

    How was the rental income reported on your 2024 and 2025 tax returns?

    Once you have that information, I think you'll have a much clearer idea whether you actually need DSCR or Non-QM financing at all.

    You may simply need someone who understands how to properly document and calculate rental income.

    • Anthony BecerraPro Member
      OP
      Colorado Springs, CO · Member since 2015 · 16 posts · 6 votes
      2w

      Hey Clay, here's more info.

      I'm trying to buy another property, not refinance.

      Townhome is worth somewhere between $415,000–$425,000

      Current Mortgage balance: $412,000

      Current Mortgage + HOA: $2,432/ month

      Total payments from tenants: $3,230/ month

      Tenant 1 since March 2026, Tenant 2 since April 2026, Tenant 3 will start October 2026. As mentioned before, I've had tenants since 2024. Some tenants have stayed for a year while others have had leases for a few months.

      2024 Schedule E (Bought townhome Sep 2024 and owner occupied)

      • Line 3: $1799

      • Line 21: -$11,974

      • Line 26: -$11,974

      2025 Schedule E (Moved out in Sep 2025 & transitioned to full rental)

      • Line 3: $27,178

      • Line 21: $22,324

      • Line 26: $4,854

  • Tyler MccleanPro Member
    Investor · Nassau County, NY · Member since 2022 · 88 posts · 23 votes
    2w

    Hey Anthony, yes its very common for lenders to typically go based off of the 1007/1025. If you happen to have a lease in place and its higher than the FMV then yes that can be used. Typically the banks I work with will just take 1007 and if you want to show higher a Lease with a receipt of the most recent rental payment collected through eithher a zelle or bank statement will suffice. Shoot me a message, I'll be more than happy to look over your scenario and let you know what i can do for you!

  • Renard BrownPro Member
    Austin, TX · Member since 2026 · 39 posts · 5 votes
    2w

    Your rent-by-the-room setup caught my attention, especially with the existing leases and rental income. We work with investors on DSCR financing and may have an option worth exploring. Feel free to message me—I'd be happy to take a quick look at the numbers and see what we can do.

  • Rental Property Investor · Fairfield, CT · Member since 2019 · 26 posts · 7 votes
    2w

    @Anthony Becerra Yes — this is definitely a scenario I’d look at.

    The biggest question is going to be less about whether there’s rental history and more about how the lender treats the rent-by-the-room setup.

    You already have several things working in your favor: the property has been fully rented for roughly a year, you have three executed leases, and you can document the actual rental income being received.

    A traditional lender may still lean heavily on tax returns/Schedule E, but I'd probably look first at a DSCR/non-QM or portfolio lender that has some flexibility around how they document the rental income.

    The key will be whether they’ll give credit to the combined in-place leases or underwrite the property based on the appraiser’s market rent for the property as a whole. That can make a pretty significant difference with rent-by-the-room properties.

    I work with a number of lenders and would be happy to take a look at the scenario before you start submitting it everywhere. If you send me the property type, estimated value, current loan balance, total monthly rent from the three leases, and roughly what you’re looking to accomplish with the refinance, I can see which lending lane makes the most sense.

    I’d rather narrow it down first than have you shop it to a dozen lenders that don’t understand the structure.

    -Jeff

    • Anthony BecerraPro Member
      OP
      Colorado Springs, CO · Member since 2015 · 16 posts · 6 votes
      3d

      Hey Jeff, sent you a pm!

  • Erik EstradaBusiness Member
    Lender · Member since 2022 · 6k+ posts · 1k+ votes
    1w

    Hey Anthony,

    Rent by the rooms are fairly tricky, particularly if you added any kitchenettes, shared living spaces, or bunker style rooms. If you operate the home as a normal 1-4 Unit Residential property with no additions or rehab to accommodate a rent by the room, there are a few DSCR lenders that will accept this style of lease.

    Most lenders will use the market rent to qualify you if the lease is greater, so you have to make sure the property can debt cover with market rent. If it can't then you have to pivot to a no-ratio/low ratio DSCR loan. The rates are higher on these and most lenders will limit the LTV and may require 12 months of reserves to show.

    The fact that you lived there and m moved out does not deter any DSCR lender. They will need to verify where you currently live now, and if you can show a lease, mortgage, ID, bank statement, utility bill, or other recurring charge that matches you name to that new address.

    LuxePrivate Investments LLC 572 Reviews
    • Anthony BecerraPro Member
      OP
      Colorado Springs, CO · Member since 2015 · 16 posts · 6 votes
      3d

      Thanks Erik! I'd like to consider a DSCR loan, but I won't have a 20% downpayment until June next year. I'll revisit this idea then!

  • Houston, TX · Member since 2025 · 34 posts · 13 votes
    1w

    Anthony, since you’re purchasing another property—not refinancing the townhome—the cleaner option may be to finance the new investment property based primarily on that property’s rental income rather than trying to make a conventional lender fully credit the room-rental income from your existing townhome.

    Your current gross rent appears to cover the mortgage and HOA reasonably well, but a conventional underwriter may discount the individual room leases or rely on market rent. A DSCR structure on the new acquisition could avoid much of that issue, depending on the new property's rent, price and projected payment.

    If the next purchase is non-owner-occupied, send me the property type, location, purchase price, expected rent, taxes, insurance, HOA and estimated credit range. I'd be glad to review which route is likely to be cleaner before you replace or disturb your existing mortgage.

    • Anthony BecerraPro Member
      OP
      Colorado Springs, CO · Member since 2015 · 16 posts · 6 votes
      3d

      Thanks for your help, Bryce. I'd like to consider a DSCR loan, but I won't have a 20% downpayment until June next year. I'll revisit this idea then!

  • Real Estate Agent · Member since 2026 · 5 posts · 0 votes
    5d

    Hey Anthony, sounds like you're trying to make the numbers work on property #2 without waiting another couple of years.

    Are you thinking of living in the next property and renting out rooms again, or buying it strictly as an investment? That could make a pretty big difference in your financing options.

    I work with buyers and investors throughout the Front Range and would be curious what you're looking to purchase next.

    • Anthony BecerraPro Member
      OP
      Colorado Springs, CO · Member since 2015 · 16 posts · 6 votes
      3d

      Hi Jon, I plan to owner occupy the next property. I am looking for either a duplex, fourplex, or SFH where I can rent out the other rooms. I'd be happy to fill out any loan applications to see my purchasing power with the following scenarios:

      -VA loan by myself (never used my VA benefits before)
      -Conventional loan 3-5% DP with my father as a cosigner for a SFH
      -Conventional loan 3-5% DP with my father as a cosigner for a fourplex

      I've talked to a couple of lenders about the VA loan and most have said that if my father were to be a cosigner, he would also have to occupy the property. Some lenders have told me that he wouldn't have to we put a 12% downpayment instead. Not sure how you do it, but if my father can cosign and not owner occupy the property, I'd be interested in knowing.

      Please let me know if you need any more information from me.

  • Real Estate Agent · Member since 2026 · 5 posts · 0 votes
    1d

    Hi Anthony, thanks for the additional details! That helps clarify what you're trying to accomplish.

    Since you're planning to owner-occupy the next property, I think it's worth comparing the VA option against conventional financing before ruling anything out. The duplex/fourplex possibilities are especially interesting because they could support your goal of generating rental income.

    I work with mortgage professionals who can review these scenarios, including the nonoccupying cosigner question, and help determine which options actually qualify. I wouldn't want to promise a particular down payment or cosigner arrangement without having a lender verify it.

    I'd be happy to help you work through the financing possibilities and then identify properties that make sense for your budget and house-hacking goals.

    Would you be open to a quick conversation so we can get started? Cheers! Jon

    • Anthony BecerraPro Member
      OP
      Colorado Springs, CO · Member since 2015 · 16 posts · 6 votes
      1d

      Cool, I sent you a pm!

  • Investor · La Quinta, CA · Member since 2017 · 26 posts · 4 votes
    1d

    My Land Buyer Needs $170K @12% 240Mo $90K Down 64% LTV $265K Appr

  • Member since 2026 · 2 posts · 0 votes
    21h

    Hi Anthony, having current leases and documented rental income may help you explore options without relying solely on two full years of tax history. The key question is whether the lender will recognize the rent-by-the-room setup and use the current income to qualify. Have you explored a DSCR refinance based on the property's current market rent and appraised value?

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