Category: Income

HOW MUCH RENTAL INCOME CAN BE INCLUDED?

  Do you own rental property?  Are you interested in financing a new home or another rental property?  How should you factor in the rental income? If you own rental properties, you can include the net rental income for qualification. If you owned the rental for less than a year, and it does not appear on your last tax return, underwriters generally use 75% of the rental income on the lease. You would subtract the mortgage payment, real estate taxes, homeowners insurance, and HOA to get the net rental income for underwriting.  

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SELF-EMPLOYMENT AND LOAN QUALIFICATION

After the mortgage crisis, there was a perception that self-employed individuals could not get loans; this was plain wrong. If you were self-employed, you could get a loan but the lenders looked at your net income, not your gross income to qualify; the same holds true today. However, if you write off all of your deductions and do not show any income, you may be able to get a loan today where you could not before. Some lenders will look at your gross receipts in your bank account, and take a percentage of those receipts and consider it as income....

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RENTAL INCOME AND LOAN QUALIFICATION

If you own rental properties, you can include the net rental income for qualification. But, how much of this rental income can you include? If you owned the rental for less than a year, and it does not appear on your last tax return, underwriters generally use 75% of the rental income on the lease. You would subtract the mortgage payment, real estate taxes, homeowners insurance, and HOA to get the net rental income for underwriting. If you owned the rental for more than a year, and it is reported on your tax returns, then the calculation is based off...

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DODD-FRANK ACT

The Dodd-Frank Act includes a provision that a borrower must show an ability-to-repay a mortgage to qualify. It seems silly that a law had to be passed with this provision in it as you would think someone would not make a loan unless they knew it was going to be paid back. Nevertheless, this law arose due to the absurdity of the types of loans that were being made during the mortgage crisis. Lenders initially interpreted this rule that the borrower needed to be employed, or have a steady income to qualify; this is one of the reasons why it...

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THERE ARE MANY DIFFERENT WAYS TO GET APPROVED FOR A LOAN

There are many different ways to get approved for a loan today. Dodd-Frank legislated there must be an ability-to-repay the loan (as if this needed to be legislated). As a result, lenders took a strict interpretation of this rule. In order to qualify, you had to be a salaried employee, or if self-employed have a positive net income, or a 2 year history of receiving interest and dividends to qualify. If you had enough saved in retirement accounts to pay cash for the house, but you were retired and had no income, you were not able to qualify. It has been...

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