Thinking about buying a home that has a rental suite? This can be a great idea if you want to help offset the cost of your home expenses, and it can also potentially help with qualifying for a mortgage on your new purchase.
Most lenders will allow you to add 50% of the rental income back to your income for qualifying, however we also have some who will consider 100% for qualified borrowers! This would increase the maximum mortgage available by approximately $65k.
Here are a few tips if you are considering this option:
- Although it may not need to be a "legal" suite, they will want to see that it has a separate entrance along with a kitchen and bathroom in the unit
- Some lenders may only consider income from the basement unit (in case you plan on living in the upper unit)
- Roommate income is not allowed by the insurers
as rental income
- Lenders will require a signed lease agreement as confirmation of the rental income. Most prefer a year lease. Some may consider a statement of economic rents (from an Appraiser) in lieu of the agreement
- If you want to qualify for the 100% add back option, you will need to have a credit score greater than 680
- Most lenders will not accept rental income from a family member
If you have any further questions or concerns, please feel free to contact me today!
