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If I split rent with someone who will not be on my loan application, can I answer the question of rent amount with only what I pay

by calebvanstrom123 from Dearborn, Michigan. Sep 24th 2020 Reply

Bert Carpenter (BertCarpenter)
#1 ranked lender in Arizona - 2,208 contributions

The answer has to do with how your lease is written. If your name is on the lease, then you should put the amount of the total lease payment. This is because if the other party were to abandon you, you would still be obligated to pay the full lease payment. However, if your name is not on the lease and you are paying an amount to the other party, who is then paying the full lease payment to the landlord, you would use the amount you are paying. The question has to do with what is referred to as 'payment shock'. Here is the scenario. Let's say your new mortgage payment is going to be $1,200, for everything...Principal, Interest, Taxes & insurance. If you are currently on the hook for a $1,000 lease payment, your payment shock would be only 20%, meaning your new payment is only 20% or $200 more than your current payment. Your payment shock is 20%. However, same scenario, but you're only paying $500 per month in rent, your payment shock would be 140% or $700 more than your current rent. Statistically, the higher the Payment shock, the riskier the loan. Common sense would tell you to always use the higher figure, BUT... beware. It is quite likely the underwriter is going to want to see Rent checks and a copy of the lease, so the best answer is the True answer. ~ Bert Carpenter, The LoansA2z Team of NEXA Mortgage ~ NMLS 40586 ~ Licensed in Arizona, California, Georgia, Oregon, and Washington. Need help in other states? We've got you covered. NEXA Mortgage is licensed in 46 states ~ 480-889-9000.

Sep 24th 2020
Joe Metzler (JoeMetzler)
#1 ranked lender in Minnesota - 4,265 contributions

The answer really doesn't matter much 99% of the time on your loan application, and technically it really depends on who is on the lease. Just you? Two people? What lenders are looking for in the answer to that question is will there be any "payment shock" when buying a new home. For example, if you pay $1500 rent now, and the new mortgage payment is $1500, there is no payment shock. If for example you pay $200 rent, and the new home will be $1500, that is significant payment shock. Payment shock is a consideration, but I wouldn't sweet this answer. I lend in Minnesota, Wisconsin, Iowa, North Dakota and South Dakota. I can be reached at - NMLS274132

Oct 1st 2020
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