Can I use the rental property in my loan application?
When applying for a loan, many borrowers wonder if they can include rental income from a property they own. The answer is **yes, you can use rental property in your loan application**. Including rental income can boost your overall income and make you a more attractive borrower to lenders.
Rental income is considered a source of revenue just like any other income, such as wages or bonuses. Lenders will typically look at your rental income over the past two years to determine its stability and reliability. Including rental income in your loan application can increase your debt-to-income ratio and help you qualify for a larger loan amount.
FAQs
1. How much rental income can I include in my loan application?
You can usually include 75% of the monthly rental income from your property in your loan application. This allows for potential vacancies or maintenance expenses.
2. Do I need to provide documentation of my rental income?
Yes, lenders will require documentation of your rental income, such as lease agreements, bank statements showing rental deposits, and tax returns showing rental income.
3. Can I include rental income from a property that is currently vacant?
If the property is currently vacant, lenders may still consider potential rental income based on market rates in the area. However, they may be more conservative in their calculations.
4. Does the type of property matter for including rental income?
The type of property does matter. Lenders may be more willing to consider rental income from a single-family home or multi-unit property rather than from a vacation rental or commercial property.
5. Can I use rental income from a property I own jointly with someone else?
Yes, you can include rental income from a property you own jointly with someone else in your loan application. You will need to provide documentation showing your ownership share and rental income.
6. What if I have rental properties in different states?
Lenders may require separate documentation for rental properties in different states. They will typically look at the income and expenses for each property individually.
7. How do lenders calculate rental income for loan applications?
Lenders typically use a net rental income calculation, which takes into account rental income minus expenses such as property taxes, insurance, and maintenance costs.
8. Can rental income help me qualify for a larger loan amount?
Yes, including rental income in your loan application can help you qualify for a larger loan amount by increasing your overall income and debt-to-income ratio.
9. What if I am a first-time landlord with no rental history?
If you are a first-time landlord with no rental history, lenders may be more cautious in considering potential rental income. They may require additional documentation or a larger down payment.
10. Can I use rental income from short-term rentals like Airbnb?
Using rental income from short-term rentals like Airbnb may be more challenging, as lenders may consider this type of income to be less stable and reliable than traditional long-term rentals.
11. Can I include rental income from properties I rent to family members?
Yes, you can include rental income from properties you rent to family members in your loan application. However, lenders may require additional documentation to verify the rental income.
12. Can rental income be considered if I am self-employed?
Yes, rental income can still be considered in your loan application if you are self-employed. You will need to provide documentation of your rental income separate from your self-employment income.