Our borrower is looking to refinance their primary residence, which includes an accessory dwelling unit (ADU) that has been rented out on a long-term lease. They are interested in cashing out to purchase an investment property and rely on the income from the ADU to qualify. With a FICO score of 740 and an LTV of 75%, the borrower can provide a lease and two months of rent receipts for the ADU. The accessory unit is legal, and the market rent is reflected in the appraisal on FNMA form 1007.
Non-QM Solution:Â
When it comes to the treatment of monthly qualifying rental income or loss in the total debt-to-income ratio, it depends on the property occupancy. For a primary residence, the following guidelines apply:
- Reserves are based on the subject property only, ranging from 3 to 6 months of PITIA.
- The monthly qualifying rental income is added to the borrower’s total monthly income without being netted against the PITIA.
- The full PITIA is included in the borrower’s total monthly obligations when calculating the DTI.
We are a top-rated mortgage broker who knows how to structure loans and knows ways to qualify borrowers using our knowledge and experience. We try to make sure that every borrower has an option to purchase or refinance a property. Contact us for more information about our ADU qualifications.
