Hey you guys and gals,
Heres my situation: Im a collector at chase bank. I make roughly 20k a year. My first property is going to be a ooc 4plex for 155-165K. Below market rent and can be increased through added value repairs. Great location. $300 cashflow after expenses. The income alone can service the debt. With that being said could a bank go off the rent roll? or would they turn me down because I make so little?
Thanks for your opinions
As long as you have a job, you can go stated income and just make up how much you make as long as it is reasonable. If there are people renting, you can use 75% of the rental income if you have the leases at most lenders. What state are you in?
Thanks for the reply shaun g,
I live in Texas.
Am I reading your post correctly- will you be living in one of the units? If so, many lenders will not allow you to use the rental income to qualify. Stated would be the only way.
Stated is probably your best bet. A few things to keep in mind: You will need to provide rental agreements for those other units that you are going to lease out. Even then most banks will not allow you to use rental income to qualify as you do not have a 2 yr. history of investing/receiving rents. In the scenario you proposed, most banks have this 2 year minimum experience as an investor/receiving rents. This is not the requirement for all banks or all scenarios but is particular to your situation. Any time you are trying to use rent to qualify there are additional standards that you must meet. If you were not looking to use the rents to qualify then the rental agreements wouldn’t be necessary, nor would the 2 year history. One last bit of advice, don’t forget to have your appraiser pull comparable rent schedules for that area-the banks will want to see that. If you have a good mortgage broker they will be aware of that though and should have already made that request from the appraiser…Good Luck!
Thanks for the replies,
If possible, could I provide 2 years of rent rolls for the property like you would use for commercial properties? could it still be possible to use the rent roll to qualify? I dont have two years in investing or in receiving rents. Am I out of luck?
You might be able to use the previous rent rolls but probably not because you are still lacking that 2 year history. The bank will need to be able (actually your mortgage broker/processor) to determine what the net rental income loss/profit is for this property. And that is done using the tax returns from the previous 2 yrs. Keep in mind though that the bank is still going to want to see current lease agreements for each unit. It doesn’t hurt to ask your mortgage broker to check with the bank’s guidelines though…