All Forum Posts by: Michael Cohen

The loan type they're talking about is the FHA 203K loan, which combines the purchase and rehabilitation into a single loan. It typically does have a higher APR and the PMI is for the life of the loan, so you will want to refi out of it eventually. Off-topic, and for the record, I am a huge fan of Dave Ramsey. However, the idea of not buying unless you put 20% down is very questionable. As is some of his other advice/numbers. But that is not his value. His value is getting people who are uninformed/uneducated about money to start caring about their personal finances for the first time in their lives. And for that, he is fantastic!

@Account Closed  - she wouldn't be able to use the vacating property's rental income as qualifying income when applying for ANY FHA loan. However, the home she's talking about isn't the one she's vacating so in this particular example, she can use it.

Originally posted by @Kimberly H.:

I don't live in my rental.  I have two leases.  My W2 reflects one year of rental income.  Wouldn't they count at least 75% of that. I currently live in a house that my husband owned prior to marriage.

 Excellent; then it's not the vacating property; you're fine.

Originally posted by @Tim Youse:

Originally posted by @Michael Cohen:

@Kimberly H. - I wasn't clear; It's not that you are ineligible, it just might not be the right option for you. 

203K is an FHA product and FHA guidelines stipulate that rental income from the vacating property (e.g. the home you reside that you're looking to rent out) cannot be used as qualifying income unless the new property is more than 100 miles away. If your W2 income can cover both mortgages, then this issue is moot.

Couldn't she refinance out of the FHA loan - and then the rental income would qualify as income?

The FHA loan would be the 203K she is trying to go into. It is on that loan she wouldn't be able to use the qualifying income.

@Kimberly H. - I wasn't clear; It's not that you are ineligible, it just might not be the right option for you. 

203K is an FHA product and FHA guidelines stipulate that rental income from the vacating property (e.g. the home you reside that you're looking to rent out) cannot be used as qualifying income unless the new property is more than 100 miles away. If your W2 income can cover both mortgages, then this issue is moot.

You do not need two years of W-2 income. You need to years of employment history. If you are a W-2 employee, then you just need paystub's for the past 30 days. If you are self-employed, then you will need to average the past two years of your net proceeds from the business to determine your qualified income.

Hi Kimberly H. Give me a call if you want; I'd be happy to give you some insight. Based solely on what you wrote - without getting into details - you might not be eligible for a 203K, but there are other similar options available to you. MODERATOR: I am offering my assistance and feedback, not soliciting.

Go FHA with 3.5% down

Stop listening to forum opinions of how someone feels it should be, or limited understandings of the laws. Go consultant an attorney in your state ASAP.

Also, rental income from your vacating property would not be considered qualifying income with an FHA loan. So your income (which already has DTI challenges) would have to cover both mortgages.