Using rental income to offset your current house payments?

If you are in the process of purchasing another house and plan on renting out your current home, most lenders will not allow you to use rental income to offset your current mortgage payment. It makes it harder for you to qualify for the home loan due to the high debt in income ratio. However, it is not true for FHA financing. YOU ARE IN LUCK!  Here are the general guidelines provided from HUD. If you meet these criteria, you still have a shot on using rental income to offset your current house payments:

  • You are able to document at least 25% equity in your current home
    Note: Most lenders require you to order a full appraisal on your current residence in order to support it.
  • A copy of fully executed lease agreement
    Note: Most lenders require a yearly contract, not a month-to-month
  • Documents to support security deposit and/or the first month rent was paid to you
    Note: make sure you keep copies of checks you receive from your tenant

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