Boarder Income Can Be Used for Mortgages
But no so fast because the details make it nearly impossible.
Our friends at Fannie Mae have started being more lenient with mortgage loans lately. They have raised the debt ceiling to 50% instead of 43 and other small changes.
One of the best of the new is allowing for income from your friend, Bob who has been living with you and paying rent the last year. Here, direct from the guide book are the guides:
The rental payments that any borrower receives from one or more individuals who reside with the borrower (but who are not obligated on the mortgage debt and may or may not be related to the borrower) may be considered as acceptable stable income. This applies for a one-unit property in an amount up to 30% of the total gross income that is used to qualify the borrower for the mortgage if:
- The individual(s) has lived with (and paid rent to) the borrower for the last 12 months.
- The boarder can provide appropriate documentation to demonstrate a history of shared residency (such as a copy of a driver’s license, bill, or bank statement that shows the boarder’s address as being the same as the borrower’s address).
- The boarder can demonstrate (such as copies of canceled checks) the payment of rental payments to the borrower for the last 12 months, or at least 9 of the most recent 12 months provided the rental income is averaged over a 12–month period.
- Payment of rent by the boarder directly to a third party is not acceptable.
This is perfect for refis but on a new purchase, you need to plan a year in advance. They need a better plan because most people look for boarders AFTER they have bought something. And, when someone is living with you, the landlord usually wants them on a lease for liability purposes.
And one other thing, this is only good for Fannie Mae’s HomeReady program where you must fall into certain income categories of maximum income you can make in a specific area.
Again, a great headline with a worthless entry point. How typical. It shows you how out of touch and how ridiculously conservative the guidelines are.