Using Departing Residence Rents; Equity Cushion; Appraisal Issue
Many homebuyers want to buy a new home before selling their existing residence. And, in most cases those buyers need the rental income from their current residence to qualify for their new purchase.
Lenders no longer require “equity” in the departing residence before rental income can be used to qualify. And lenders will only use 75% of the actual rental income (to allow for vacancies and expenses).
Lenders require a copy of the lease, a copy of the check from the renter, and proof that the check was deposited into the homebuyer’s account.
Lenders also require a rent survey from an appraiser that proves the rent is at the market rate. If not, we cannot use all the rent.
The problem is that appraisers often do not have access to the latest market data. Most homes are rented via Craigslist and other sources that appraisers cannot use for data (appraisers have no way of knowing if the listings are closed or consummated at the list price). Hence, appraisers are forced to rely on traditional data sources like MLS that are often inadequate and outdated. As a result, our rent surveys often come in low.
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 01524255, NMLS# 335646