OfflineI am intersested in closing on two properties but I have a question. I am going to be the sole mortgagee for the first property and closing is set to be due in the first week of February. During this time I have also found another property which I will be partnering with a friend of mine to purchase. We will be taking out the mortgage together for this property (my 2nd). My question is this- since the rental income from my first property covers the PITI expenses of my first property, will the lender see it as a complete wipe and allow me to take out another mortgage? FYI - the first mortgage is a stretch for me but the lender saw that the income would cover the expenses and approved it. Please let me know what you think.
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Typically lenders are going to use 75% of the rental income off investment properties. That is the income they will use to determine your debt to income ratio.
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Yes I understand that. But what if this income covers the PITI expenses, will they view it as a clean wipe and I can obtain a second loan with more or less the same loan limit?
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Sure.. if you have that much coverage it wont hurt your ratios. Imagine the extreme example.. the property is free and clear. What are they gonna do? Not count it at all?? Nah, you seem fine.
The mortgage companies will look at your debt to income ratio when giving you a loan. When you are purchasing an investment property the mortgage companies will allow 75% of the rental income to go towards your debt to income ratio (DTI) - even if the rents cover the PITI they will only allow 75% of the rents. This means you may not be able to get a loan if your DTI is too high because they are not allowing 100% of the rents to count towards the purchase of the property.
Using private money is a different story.
If you would like the chance to work with me or one of my fellow real estate investor coaches and our advanced training programs, give us a call anytime to see if Dean's Real Estate Success Academy and our customized curriculum is a fit for you. Call us at 1-877-219-1474 ext. 125
I do have a back ground as a mortgage officer, and when they figure your income if you have rental properties they will only count 75% of the rent towards income. So if your payment is $1200 PITI your rent would need to be $1600 for it to be a wash in the lenders eyes. Those are the guidelines they have to follow.
If you would like the chance to work with me or one of my fellow real estate investor coaches and our advanced training programs, give us a call anytime to see if Dean's Real Estate Success Academy and our customized curriculum is a fit for you. Call us at 1-877-219-1474 ext. 125
so does the bank take 75% of the rental income estimated by the appraiser or the actual income?
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Actual. I expect they want leases/rental agreements i nthis day and age. In the past, I just told me broker what the # was.
Appraisers dont know squat about rental rates.
Most finance companies will use the rental agreement for thier numbers while there are appraisers that have a great knowledge of basing value on rents banks and finance companies want to know what you are actually getting for rents.
If you would like the chance to work with me or one of my fellow real estate investor coaches and our advanced training programs, give us a call anytime to see if Dean's Real Estate Success Academy and our customized curriculum is a fit for you. Call us at 1-877-219-1474 ext. 125
Is it true that the lender will take the rental income only if the buyer have 2 years of experience renting apts out? This is what I've heard. Is this true?
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My mortgage broker told me the same thing which makes it hard to qualify for that next mortgage. Can someone here speak from experience and at this current market?
We're buying the 4-unit apartments which were foreclosed on, and are thus empty. This is our first home in more than 3 years, and we will be owner-occupied on one unit. The lender (conventional FHA loan) is taking 75% of the stated previous rental amount (no proof available) for 3 of the units and adding it into our income to figure our DTI for this loan. So, in our case, they are not requiring us to have any rental experience at all to give us the credit. Our DTI was over and above (or down and below?) what was needed even without the rents, though, so we'll see how it goes when we go to do the next project.
Tracey R.
This is true with many mortgage brokers that think and work inside a box. There are still a lot of options such as FHA that was mentioned above that can help you to get into a rental property without ever having a history.
Remember, not all mortgage brokers are created equal.
Most of the time that experience renting becomes a factor is when you are dealing with properties above a four plex. A four plex and below is considered residential where as a five plex and above is considered commercial.
If you would like the chance to work with me or one of my fellow real estate investor coaches and our advanced training programs, give us a call anytime to see if Dean's Real Estate Success Academy and our customized curriculum is a fit for you. Call us at 1-877-219-1474 ext. 125
I'm trying to find out how to get above and beyond a 5 mortgages limit my broker was telling me about. She said it use to be 10 was the limit. I hadn't heard of this. I'm just now going after my second property and I use a HELOC to pay ether cash, (but 6 month season if I do) or if I'm able to go straight for a Conventional loan on it (vs no seasoning). But I can't find enough information about this 5 mortgages limit...?
Would anybody with knowledge about this please post?
Thanks DG.com family....
Barbara
Owen Properties, LLC