The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: ysette9 on July 03, 2020, 02:33:48 PM
-
Long story short, we are renting out our old house for the time being while we rent in a new location, as a sort of test drive to see if we want to relocate permanently. In an idea state we would sell old house A before buying new house B. Looking ahead, I'd like to estimate how much house we could qualify to buy if we bought house B before selling old house A. I did a quick search online and couldn't find any mortgage calculator that allowed that extra detail. Do I need to speak to a bank to see how they would treat rental income on house A? I'd prefer some handy rules of thumb or an online calculator if at all possible.
-
This is not a rule of thumb, but at a point in the past i bought a new primary house - while renting out the "old" house, which had a conventional [owner occupied] mortgage on it. The mortgage broker for the new house wanted to see 2 years of taxes, showing that i claimed the income, in order to use 100% of the rental income on the old house, as part of my total income.
As i did not have 2 years tax / rental income / depreciation reciepts, they would not allow for the full amount to be claimed as income -- However, they verified what i was charging per the square footage was reasonable for the town, and agreed to use a figure of 75% of the rent, as income.
Maybe your mortgage company / broker would allow you a similar percentage [ doesn't sound like you have been renting for 2 years yet].
-
I think I had read the 75% figure someplace a while back, so that makes sense. If we go down this path we won’t have had a 2-year rental history. I suppose I just need to talk to a bank.
-
Ditto on the bank methods. Be sure to document your tenants with a 12 month lease, and some banks may be more or less flexible if they are or aren't selling their loans. We worked with a bank needing CRA credit and holding their mortgages on their balance sheet, and so let us slide with showing one year history on tax returns and a new tenant on a lease.