I’ve been thinking about refinancing my mortgage to get a better interest rate. The problem is the I do not meet the income requirements to get the best interest rate of all… if only I could count the rental income I get from the 3 rooms in my house that I rent out, I would easily meet the requirement. However, none of the banks I’ve tried will recognize the rental income as income!! it’s so frustrating… does anyone know if there is a way to count rental income as income on a mortgage?? Please help! thanks.
I’m not sure where you are and I’d suggest that the rules of what constitutes income vary from jurisdiction to jurisdiction.
FWIW, I live in Australia, and I know the following works here. In fact, I have issued loans on this basis.
Have a formal lease drawn up with the people staying with you, and declare the income on your tax return. This leaves no doubt that you are earning the income. Almost nobody would be willing to pay tax on income they didn’t actually receive.
Keep in mind though, that it is up to the lender in the end and they don’t have to provide a reason that you like. It’s their money after all.
I do mortgages in California and sorry, even though you get paid real money, lenders cannot count it as income. This is because the rental income isn’t from a separate living space (ie, 2nd unit with it’s own kitchen, bathroom, etc). This is a standard conventional loan guideline set forth by Fannie Mae and Freddie Mac who buy all the conventional mortgages (and thus make all the rules). What you need to do is apply for a “non-conforming” loan with a stated income or EZ Qual option. This allows you to state your income without having to back it up with any documentation. You just add your rental income and your regular job income together (you still can’t use “boarder” income on this program) and state the total as your income. And then just take the 5/1 option. It’s a 30 year loan but it’s only fixed for 5 years then it rolls to an ARM for the remaining 25. I know you probably want a 30 year fixed rate but the 5/1 rate will be at least a 1/2 point lower and you can always refi it again at the end of the 5 years. You’ll hopefully be making enough money at that time to get a straight 30 year loan. If you’re in the Los Angeles area email me. I’ll hook you up. Good luck!