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1/11/2010 12:45:41 PM
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tiltstickels
Posts 1
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Here's the situation.
My wife and I each own a house. I own my house with my brother (current loan is 220k, $1700 per month). Her current loan is 150k ($1200 per month). We both have no credit card debt and our only combined debt is 2 auto loans ($700 total per month).
My wife and I make 170k per year. We plan on renting her house in the next few months and shouldn't have any problem getting enough to make the monthly mortgage payment a "wash".
My wife and I would like to purchase a property together. Will you be able to get a loan? How is the rental income calculated?
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1/11/2010 4:05:33 PM
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MortgageMarvel
Posts 38
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For the purposes of this response, we’ll focus on the income and expense factors of mortgage underwriting with the understanding that there are other factors that could impact your ability to get a loan that you haven’t shared, like down payment, credit history and length of employment. That said, there’s nothing about your scenario that will absolutely prevent you from getting a loan, but your ownership of additional properties may limit how much you can borrow.
Lenders will typically limit a borrower’s debt-to-income (DTI) ratio to 36-45% of his/her total income. Those with strong compensating factors (e.g. higher income, higher credit score, lower loan-to-value (LTV) ratio) would be allowed to have their monthly debt obligations closer to 45% of their gross income. In your case, your debt will include the monthly principal, interest, tax, and insurance (PITI) payments on your new property, your auto loans, and some portion, possibly 100%, of the PITI payments on your existing homes.
For the residence you share with your brother, as long as your obligated to the mortgage holder, your new lender is likely to include some portion of the payment in your DTI ratio even if your brother agrees to pay the full amount. If you can demonstrate that you have only been paying half of the monthly payment, a lender may only include that amount in your monthly obligations. If you transfer the property to your brother and he refinances the existing debt without you as a coborrower, a lender would typically exclude this debt from your monthly obligations.
Your wife’s current residence will be viewed as an investment property. With a signed lease and paid security deposit to rent the property once she vacates, a lender will typically offset the PITI payment on this debt with 75% of the gross rental income, if you have at least 30% equity in the property. If you do not have 30% equity in this property, the lender will not likely allow any credit for the rental income.
In a worst case scenario, a lender would include 100% of the PITI payment on all three properties and limit your monthly debt payments to 36% of your gross income. In this case, with gross monthly income of $14,166 ($170,000/12), the PITI payment on your new property would be limited to $5,100 ($14,166*0.36). Subtracting your current mortgage and auto payments ($5,100-$3,600) would leave $1,500 for the PITI payment on your new home.
Your best option would be to talk with a loan officer to get a better handle on how much financing might be available to you. You can easily find a competitive lender on www.MortgageMarvel.com by conducting an rate search that fits your transaction, then just click on the telephone icon below the name of your preferred lender. Call the number, ask for a loan officer, and you’re off to the races.
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