CNN Money reported this week that some homeowners are becoming landlords. Why? Many homebuyers in Virginia Beach, Norfolk and Chesapeake, have a low interest rate on their mortgage, which makes it attractive to keep the property (as rental/investment) for additional income.
Depending on the loan program and investor requirements, both housing payments (investment and proposed primary residence) can increase your debt-to-income ratios and may affect your ability to qualify for a new home loan.
***However, to qualify for a mortgage using the income from investment property, homeowners must have established history of being landlords.***
To use income from investment property, you need the items below to qualify for a mortgage on a primary residence:
- Tax returns: you must claim the rental property and its income on your tax returns (even if there is a loss)
- Copy of lease agreement
- Reserves: you need at least six months of reserve cash in the bank for rental property (full mortgage payment including principle, interest, taxes and insurance)
If you want to buy and finance an investment property, you will need:
- Rent loss insurance: in case of damages (ex: fire) that leave tenants unable to occupy the property, rent loss insurance will protect the landlord’s gross rental income while the property is repaired.
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