FHA's 25% equity requirement to count rental income.....?

[Dee2]

Ok...so I understand that there is a requirement by FHA in order to count rental income I'm receiving.  I also can understand why they implemented such a rule.  Here's what I'm confused about and I'm hoping you good people can help me out here. 

According to the current guidelines my current home (which I am renting) must show that I have at least 25% equity before i can count the rental income as my own.  Here's my dilemma and I'm certain that others are facing the same issue.  My property happens to be in area in Maryland that has been affected by foreclosures. (No big surprise there. )  So...how in the world would I go about determining whether or not I have over 25% equity in my property?  My guess is that I would have to obtain an appraisal, but it hardly makes sense to go out and pay $500 for an appraisal when I know that surrounding foreclosures have affected the value of my home.  Not to mention that with the still fairly new Appraisal changes that took place, I run the risk of having someone come and appraise my home who has no knowledge whatsover of the properties in my area.  Case and point.......last year an appraiser came out to my neighborhood to appraise a property a few doors down from me.  The appraiser was asking me...ME....about recent sales in the neighborhood and what I though MY home was worth.  Now...at the time my house was on the market, but I'm not an appraiser.  Naturally I believe my property was worth what I had it listed for....duh......that was a little scary.

So...how in the world would this work?  Can FHA go into some sort of database and electronically look up what a recent home in my neighborhood appraised for or will I have to suck it up and pay for an appraiser.

Thanks

~Dee

[ShanetheMortgageMan]

Yup, when there is a mortgage on the property an appraisal is needed to determine if you have sufficient equity.  You don't order it, the lender you are getting the mortgage from orders it.  If you absolutely know there isn't 25% equity, then you should plan on qualifying without the rental income and also not waste money on an appraisal.  If it's close to 25% equity, you can pay your mortgage balance down to where you would have 25% equity.

Full details can be found at http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/08-25ml.doc