Real Estate Financing Tip

Rental Income from a Property Being Vacated by a Borrower

If a Borrower is unable to sell his/her existing house, then rental income from the vacated property can be recognized in calculating the Borrower's debt to income ratios. Most lenders utilize the following underwriting guidelines

- The Borrower has a signed 1 year lease from the tenant

- The Borrower has received a security deposit and the first month's rent from the tenant

- The rental property has at least 25% equity (or a loan-to-value ratio of 75%)

If the above items are satisfied, then a lender will utilize 75% of the rental income in calculating a Borrower's debt to income ratios.