Kentucky FHA, VA, and Fannie Mae Conventional Mortgage rules for rental income
Today's borrowers often wish to retain their existing homes when purchasing a new primary residence. Many questions arise about utilizing rental income from the previous home to qualify for the new mortgage. To clarify the guidelines, we've compiled the pertinent information below.
FHA
- Must be relocating 100 Miles from departure home.
- Appraisal evidencing market rent and that borrower has 25% equity. Does not need to be done by FHA appraiser.
- Executed Lease agreement of at least one year’s duration after loan close.
- Proof of receipt of security deposit or First Month’s Rent.
- Mortgagee must deduct the PITI from the lesser of:
- the monthly operating income reported on Fannie Mae Form 216/Freddie Mac Form 998; or
- 75 percent of the lesser of:
- fair market rent reported by the Appraiser; or
- the rent reflected in the lease or other rental agreement.
Conventional
- Executed long term Lease which must start prior to first Payment due date.
- Form 72/1007 supporting lease or 2 months receipt of rental income (or security deposit + 1st month)
- 75 % of lesser of lease or market rent will be used to offset PITIA of departure home. Income above PITIA can only be used if borrower has documented 1 year history of Investment Property Management. If no prior history, it is limited to zero positive cashflow.
The following sources outline the general rental income eligibility requirements for conventional conforming mortgages.
VA
- Must provide either a fully executed lease agreement or CMA (Comparative Market Analysis) completed by a real estate agent.
- Must use 75% of the lease agreement amount or 75% reported on the CMA.
- Can only be used to offset PITIA
Joel Lobb Mortgage Loan Officer
American Mortgage Solutions, Inc.10602 Timberwood Circle
Louisville, KY 40223
Company NMLS ID #1364
Text/call: 502-905-3708
email: kentuckyloan@gmail.com
http://www.mylouisvillekentuckymortgage.com/
NMLS 57916 | Company NMLS #1364/MB73346135166/MBR1574