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sandbridgeghostcrabs · Joined: 26 Aug 2010 Posts: 2 2.57 Dollars($)

If you own a rental property in another state and have moved for work, how does the rental property fit into qualifying for a new mortgage? I have read two conflicting reports - one says that the rental property must have 25% (for FHA) or 30% equity...what if it doesn't? The other thing that I read was if the property does not have the equity requirement, the income of the property must be shown on the owners tax returns and then the equity requirements are waived. I'm just looking for clear guidelines as my rental property really has no equity (I originally put 10% down - but the market has changed). Must it have 30% equity to use the rental income as part of the dti ratio, or must it have the equity no matter what?

Thanks

I had posted this in another link, but I realize I was asking too many questions and decided to focus it down to this issue.

adonis · Posted: Thu Aug 26, 2010 8:30 pm Post subject:

Hi sandbridgeghostcrabs,

Unless you have equity in your property, you won't be able get a mortgage using it as the collateral. Lenders will appraise the property and check out whether or not there's equity in your property. They won't lend you money if you don't have at least 20% equity in the property.

sandbridgeghostcrabs · Joined: 26 Aug 2010 Posts: 2 2.57 Dollars($)

So does that mean the rental property must have at least 20% equity period, or the rental property must have 20% equity to be able to use the rental income in the debt to income ratio?

Thanks

smithsussane · Posted: Sat Aug 28, 2010 12:07 am Post subject:

Hi sandbridgeghostcrabs!

Welcome to forums!

In order to get a refinance, the lender will want you to have at least 20% equity in the property. But whether or not rental income is included in the debt to income ratio will not depend upon the equity.

Feel free to ask if you've further queries.

Sussane

keilysmith · Joined: 29 Aug 2010 Posts: 5 1.82 Dollars($)

Property requiring cosmetic improvements to command a decent rent month. rents are often abused by tenants while most properties should refurbished floors, walls painted, new appliances, etc. to attract tenants. And this can only occur when the property is occupied.

Guest

I, too, am looking for an answer to this question. I want to see if lenders will consider the rental income as "verifiable" income. What if the rental home has negative equity...will lenders just not let you borrow? What are the rules regarding this?

adonis · Posted: Thu Sep 09, 2010 11:06 pm Post subject:

Hi cathyc,

If there is negative equity in your property, then you won't be able to get a mortgage refinance on it. Unless you've equity in your property, the lenders will not be ready to give you a refinance. As far as I know, the rental income will be considered when you apply for a mortgage.

jveenstra · Posted: Fri Sep 10, 2010 10:50 am Post subject: Rental Income

In order to use rental income for qualifying purposes when the rental income is from a recently vacted owner occupied home that is now becoming a rental property, FHA requires 25% equity and Fannie Mae and Freddie Mac required 30% equity in the home being vacated.

There are lcoal portfolio lenders in some states who have their own guidelines and do not care about the equity in the home being vacated. They usually require at least a 20% down payment on the new purchase.

You may get a better local lender answer if you note the state of the new purchase.

Company	Loan Type	APR	Est. Pmt.
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Property State:
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