Money Matters
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Rental impact on getting a mortgage

DH and I just moved recently (he is in the military) and we are renting our house out in TX.  We are planning to purchase a house when we get to our next base in Feb/Mar.  How does rental income impact our debt-to-income ratio and getting approved for another mortgage?

The renter's started renting in Aug, so our tax return will only 5 months of rental income. 

 TIA for your help and advice.

Re: Rental impact on getting a mortgage

  • image usafabridetobe:

    DH and I just moved recently (he is in the military) and we are renting our house out in TX.  We are planning to purchase a house when we get to our next base in Feb/Mar.  How does rental income impact our debt-to-income ratio and getting approved for another mortgage?

    The renter's started renting in Aug, so our tax return will only 5 months of rental income. 

     TIA for your help and advice.

    The way it was explained to me by our mortgage company was that we would list all forms of income (to include the rental property) and then when they pull our credit they will see that we have another mortgage payment. They then would factor the debt to income ratio. To me I took that as the rental payment would "even it out" because it would be paying the other mortgage.

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  • This may vary by state and by lender.

    But when we applied for a mortgage earlier this year, we were NOT able to count our rental income as "income", because we didn't have a full 24 months of rental income history to qualify it as rental income. 

    So this, of course, greatly affected the amount we were approved for.  We've decided to wait until we have the full 2 years before we apply for another mortgage.

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  • Are you doing a VA mortgage?  I think this changes things a little and allows a little more freedom.  I believe under VA you can count it as income but don't quote me on that.
  • Yes we are doing a VA loan.
  • The new laws will be a pain for you just like they are for us. Unless your other property has a year rental history the current mortgage in addition to your new mortgage will all be included in your debt to income ratio. After 1 year that is no longer the case because you will have provable stable rental income.
  • We are renting out one of our homes and felt it was best for us to not count the rental income as income. We want to be able to afford both mortgages if necessary (like if we are without renters for a period of time). I would highly recommend you do the same.
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