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Confused on income versus debt in terms of my income property.

I own a duplex,live in one and rent out the other. I'm planning to rent out both units and buy a single family home. Looking for a conventional, 5% down with no PMI, is that possible? Will the bank look at my old mortgage as debt even though it's really investment property? by kingma173 from Fremont, Nebraska. Jan 26th 2021 Reply

Bert Carpenter (BertCarpenter)
#1 ranked lender in Arizona - 2,423 contributions

You will not be able to find a 95% loan without mortgage insurance and the current mortgage on the duplex IS debt. Typically, the way a lender calculates your rental property income is one of two ways. If you have not owned it long enough to have filed taxes, including the Schedule E for rental property, then the lender will take 75% of the existing and proposed rent as the income, deduct your expenses and leave you with a Rental income that is positive or negative. So you would need to have the unit you are living in under contract with a lease of at least 6-months or longer and be able to document you have received the Security deposit and the first month's rent payment for the underwriter to consider it. If 75% of the rent you collect is less than your mortgage and other rental expenses, then the rent will only partially offset the expenses. You will also be required to have a cash (bank account) reserves to cover a certain number of months of payments on the rental at the close of escrow. ~ Bert Carpenter, The LoansA2z Team of NEXA Mortgage ~ NMLS 40586 ~ At NEXA, we've got you covered. We are licensed in all states except MA and NY and we are pending approval in VA, so give us a call. ~ 480-889-9000.

Jan 26th 2021
Joe Metzler (JoeMetzler)
#1 ranked lender in Minnesota - 4,703 contributions

With 5% down, you can't "get away" from PMI. You can get a loan "without" PMI, but all the lender is going to do is hide the true cost of PMI into a higher interest rate. Its just a shell game. Under what cup are they hiding PMI - You will always pay somehow with 5% down. Next, YES, the existing house, even as an investment property is debt and calculated into your new home loan qualifying debt ratio. The lender will look at your Federal tax returns, Schedule E to see the details of the rental property. Depending on your numbers, it may help you qualify, be neutral, or hurt you. No lender can answer without a full review of your application. I lend in MN WI IA SD ND. Find me at - NMLS 274132

Jan 29th 2021
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