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spider2928 · Joined: 27 Jan 2010 Posts: 6 2.62 Dollars($)

My brother and I are looking to buy a townhouse together and would like to use FHA in order to keep our downpayment low. My brother currently has a condo that he is upside down on but is renting out (we are both living rent-free with our parents at the moment). He has a 12 month lease signed with his renter who has been paying rent for almost 6 months now and the rental income is shown on his 2009 tax returns. Would this rental income count towards his DTI eventhough he is upside down? I understand that they dont want people buying and bailing but this is not the case since hes been living at home in the mean time and has a qualified renter, he just wants to hedge his losses...

gmakerley · Posted: Wed Jan 27, 2010 9:52 am Post subject:

he ought to be able to use his rental income to help in qualifying. it can be documented using the lease, the tax return, etc. and, of course, being able to demonstrate that he's been residing in the family home instead of that condo will be beneficial.

for fha loans, 85% of the monthly rent will be considered toward qualifying. to put that in numbers...if rent is $1000, then the income used for that rental would be $850; which, of course, would be considered in addition to all other ordinary forms of income.

spider2928 · Joined: 27 Jan 2010 Posts: 6 2.62 Dollars($)

Thanks for the fast reply! If he hasn't been paying any rent at the family home how will he be able to demonstrate that he has been living there?

gmakerley · Posted: Wed Jan 27, 2010 10:27 am Post subject:

cellphone bill? address appearing on bank statements? address appearing on pay stubs?
then again, most will just take his word for it - particularly since he'll be able to demonstrate he's not living in the property that is rented.

Guest

I am currently looking to buy again. I have a home i purchased 1yr ago and rent for 1500 and another i purchase din 2007 that i rent for 1000/mo... but Quicken loans will not consider that as part of my income, so my DTI is much more than it is!

they say its because of my tax reports... of course i write off the interest and it cancels the porfit. After everything I am down $600/mo with the rentals, but with taxes things even out.... so it almost as if i didnt have those mortgages.

how do i getthis income considered?

Guest

Unless the rental income is included in your taxes, you won't be able to convince the lender to consider them as your income.

gmakerley · Posted: Mon Apr 25, 2011 1:33 pm Post subject:

Arturo, the first thing you have to know is that lenders consider rental income at 75%. For you, that means they'll use $1125 for your $1500 rental income and $750 for your $1000 rental income. From those numbers, they deduct your debt service (mortgage, taxes, insurance) to come up with either a positive or negative number. If your payments, for example, on your higher rent house were $1000, then you'd have a net income of $125 monthly on that house and so on...

Since we know nothing else about your financial picture (income, debts and so on) we can't really comment with much impact on whether they're not being fair to you or not.

In all likelihood, though, I'd have to think that they're using standard procedure and that it's just not working out for you.

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FHA Rental Income Guidelines