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CAN HUSBAND AND WIFE EACH BUY A HOUSE FOR RENTAL WITHOUT OWNING PRIMARY HOME
Can me and my husband by ONE house each rent them out and then use that income to buy our forever home?
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1 Reply
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Yes, both you and your husband can buy a house each to rent. Then, use the rental income from the two homes to qualify for a loan to purchase your home. This strategy is popular among real estate investors who want to grow their wealth by leveraging rental income against future property acquisitions. Here’s what you need to do:
Purchasing Rental Properties:
Financing First Two Homes: You and your spouse should consider buying separate properties without necessarily jointly applying for financing. This way, each person’s income, credit score, and financial standing will be used to qualify for loans on individual properties.
Down Payment: Most lenders require a 15% to 25% down payment when financing investment properties. However, if one of the houses is temporarily owner-occupied, it may attract lower down payments with such mortgages.
Generating Rental Income:
Renting Out The Property: Once purchased, these houses can be rented out, generating regular monthly rentals that will help in servicing mortgages and building equity over time.
Documenting Rental Income: Lenders must be provided with evidence of rental income. Evidence of rental income is lease agreements plus receipts and bank statements showing tenant rent payments into landlords’ accounts each month. Most banks or mortgage companies only recognize three-quarters (75%) of total rents received, less rates levied for vacancies or repairs, as being able to offset periodic repayments due under buy-to-let deals.
Qualifying For Your Forever Home:
Using Rental Income To Qualify For Mortgage: When applying for a loan to purchase an owner-occupied property where you plan to live forever, banks usually consider all sources of earnings, including those derived from letting other units within premises owned by the borrower(s). This increases the chances one qualifies for higher amounts than possible had they relied solely on personal paychecks.
Seasoning Period: Some institutions may demand that before considering rental collections as part of a borrower’s gross income while evaluating their ability to repay advances secured against a primary residence, such money should have been coming consistently over six (6) months up to one year.