As a real estate agent, I’m asked many questions. One of them is “Can rental income be used to qualify for a mortgage?” While this question is best answered by a lender, and will vary on a case by case basis with those lenders, it’s also a question which I can answer in a general sense. Conventional wisdom says that rental income cannot be used when evaluating a borrower’s qualifications for a loan, and that is largely true. In some circumstances, however, a borrower can factor in rental income.
If a borrower has a history of rental income reported on their last 2 tax returns, they may be able to use the rental income of the new property. Only 75% of the income can be used, with the remainder expected to be used for maintenance and other costs.
For buyers who expect to rent part of their property, obtaining a loan like this can mean the difference between purchasing the property or not. Many houses in Crested Butte, for instance, have accessory dwellings which can be a substantial source of income for the homeowner, and make a huge difference in how affordable the property really ends up being. Other properties, such as duplexes, are also easier to obtain if the borrower can count the rental income from the other half of the property.
Lending standards can change. Contact me and I can provide you with a list of local lenders that can provide additional information.