-
Can rental income of this 4 unit be used to reduce the mortgage payment
On 4 UNIT Owner Occupied FHA loan. Can rental income of this 4 unit be used to reduce the Mortgage Payment.
-
This discussion was modified 4 hours ago by
Allan Kim.
-
This discussion was modified 4 hours ago by
-
1 Reply
-
Yes, a mortgage loan FHA can be obtained using rental income earned for residing in one’s 4-unit owner-occupied property, which may lower the loan cost. However, the following details should not be missed:
Using Rental Income for Qualification
FHA Guidelines: According to the FHA guidelines, one can use a fraction of the other units’ rental income to repay the loan, which increases the chances of loan approval as it helps manage the DTI (debt to income) ratio.
Documentation Required: To prove what one states regarding the rental income, documents have to be presented, including:
- Lease agreements on the rented units.
- History of rent payments over the last few months.
- An appraisal of the property that indicates its rental value in the market.
Assessing Qualifying Rental Income
Proportion of Rental Income: Most lenders consider 75% of the rental income to account for vacancies and nonpayment. Therefore, if the rental income for the three rented units totals $3000 per month, chances are that one would qualify for the mortgage if one claimed $2250 ($3000*75%).
Owner-Occupancy Requirement
Owner-occupied: A four-unit resident of the borrower’s property must live in one of the units to get a Federal Housing Authority loan. This is also a condition for FHA financing.
Impact on Debt-to-Income Ratio
DTI Calculation: The Borrower’s DTI ratio is a crucial metric for lenders to assess the property owner’s loan repayment ability. And this can be furthered by stating that it would appreciate the borrower in terms of a loan.
Consulting with Lenders
Lender Policies: Different lenders may have certain policies regarding estimating and accepting rental income. It would help if you spoke with applicable lenders about your circumstances to be aware of their requirements.
Pre-Approval: Preparing for the pain of an FHA loan is recommended, as it can provide insights into the maximum rental income you can qualify for.
You may qualify for an FHA loan for the four-plex owner-occupied property by using rental income to reduce the mortgage payments. Ensure that proper documentation is provided to the relevant authorities and lenders to enable them to understand your expectations and metrics regarding rental income. Should you want further guidance or have more questions, don’t hesitate to ask!