Lots of lending questions!

[Anonymous]

We currently have 2 VA loans (one from our last duty station that we currently rent out) and our current home which we just purchased in May of this year before we knew what was ahead.  My husband will be getting out of the army (medical retirement) in about 6 months.  We are wanting to move back to our home state and purchase a home there and turn our current home into a rental.  I am sure I could contact a lender myself and ask these questions but we are just not to that point yet.  

I have calculated our DTI and it's 31% front end and would be about 43% back end if we go to the max of the budget we are currently considering.  

Thanks in advance!   

Question 1 - Will I have to be on the loan if we go conventional?  I am a stay at home mom and have no income.

Question 2 - How many months rental income do we need in reserves on top of down payment?

Question 3 - Is rental income still calculated by taking the amount of rent and subtracting 25%?  Also, we will only have our current home rented for about 2-3 months when we put in our loan application so the income would not yet be listed on our taxes.  Would they accept a lease agreement alone?

Question 4 - He already has a job secured for when he gets out but at the time of our application he will have only been on the job about 3 months.  Will this be a red flag for the lender even though it the job change was due to military service?  He will also be getting a percentage from the VA for medical conditions.

[Anonymous]

Bump

[ShanetheMortgageMan]

#1 - nope, you won't be required to go on the loan.  Depending on the state you are buying it, you may have to sign some of the lender prepared documents though.

#2 - I don't quite get your question.  Are you asking what is required to use rental income?  If so, then if the previous home you have been renting out will have it's rental income reported on the tax return, then that in itself should be enough.  For the home you are currently living in, conventional requires you have 30% equity in order to use rental income from a primary residence you are converting to a rental property + you'd also need 2 months PITI in reserves on that home & the home you are purchasing.  If you do not have 30% equity, then you won't be able to use the rental income + you'll need 6 months PTI in reserves on that home & the home you are purchasing.  You could always just sell that home simultaneously with, or prior to, purchasing the new home and then it wouldn't need to be considered.

#3 - if the rental income is reported on your tax return, then it'll be calculated from the income/expenses on your Schedule E.  If it's from the primary residence you are converting to a rental property, then only 75% of the rental income will be used to qualify.

#4 - if the civilian employment is related to his job in the military then it should be able to be used even if he's only been on it for 3 months.  If it's not related, then it's up to underwriter's discretion, but if it's a career oriented job then usually it will still qualify.  VA disability income can be used no problem, and for qualifying purposes it can even be grossed up by an additioanl 25% since it's non-taxable income.