HELP!! Tax return question on a HARP refi 4 a rental :(

[boober]

I'm in the process of doing a HARP refi on my rental home. Going from a 30 to a 15 year. Here's my problem....

The bank just sent me some paper work in the mail to fill out and send back. They're asking for copies of my tax returns for a couple of years.

Here's what's freaking me out, for those 2 years I had no rent coming in for the rental, so I show a big loss for both years. Could this be a potential problem in getting my refi to go through??? The last few months or so I have begun renting out the home so I am now making money.

I know that in years before when getting a mortgage, they wanted your tax returns for income verification. But do they scrutinize rental income on the tax returns or is it just for income verification like for a normal primary residence? I really need this refi to go through so I'm stressing out now.

Thanks

[JM-AM]

Is your DTI okay if rental couldnt be counted? Thats the first question you have to ask yourself.

[boober]

I was wondering about that but currently it's being rented out. And has been for the past few months. During the time it was not rented out I made all the payments on it no problem. I've owned the property with this same bank I'm trying to do a HARP refi through for about 8 years now.

So when it was unrented and not collecting rent, it would have definitely pushed my DTI too high. But I still made payments like clockwork back then. But as it has been and is currently being rented out, my DTI is fine.

I'm thinking I should be ok, but you never know. I would think this shouldn't be an issue since I've had this property with the bank I'm refi'ing through for 8 years now. It's in their best interest to get me into a shorter term loan anyways right?

I'm just worried they'll see my tax returns and the losses for these years and they'll freak out and say "Hey wait a minute! What's this all about?"

I'd like to think since I've owned this property for so long with them they'll just overlook it.

[boober]

The more I'm thinking about it, the more I'm thinking I'll be ok.

I had told them previously that the home is veing rented for $1000 a month.

If they happen to see there being no rent collected for those 2 years, I would think they might say ok that's wierd, why is there no rent collected? But then they might just say, well no rent was collected but at least he was still able to pay the mortgage every month. Shouldn't be a problem...

What do you guys think????

This whole thing is just killing me. If this refi goes through my payments will stay the same but I'll knock about 7.5 years off the loan.

Thanks

[boober]

I really stumped you guys with this 1 I guess.

[JM-AM]

Its Friday and I am sure everyone trying to tidy up weeks work piled up.

You could have an issue with a refinance in your situation.

Since you havent been renting very long it could very well be taken out of the equation on affordability. Your DTI will play a major part in decision.

I have seen things approved out of the ordinary, so YMMV, but I wouldnt assume its an easy approval.

[boober]

Here's the thing. I bought it about 7.5 years ago. It's been rented out to my parents for that whole time.

A few years ago they had money problems. My dad lost his job and they were unable to pay rent. Long story short it turned out to be longer than I expected for them to get back on their feet. I make good money so it wasn't an issue for me. After all familiy's family.

So finally about 6 months ago or so my parents were able to start collecting SS and since then, money's no longer an issue.

So it has been rented out for a long time to the same people, just had that little period of time when there was no rent collected.

Kind of a unique situation.

[JM-AM]

I understand, but to count it as income you had to include it in your taxes, so that is where you run into issues.

If you make good money DTI may not be an issue. So it is possible you may not have any issues.

[boober]

Thanks JM-AM for the help.

Still freaking out though.

[boober]

I did some more looking up on the net on this particular scenario I'm freaking out over, and I found the following... Which gives me the impression I am going to be ok.

I found this....

"As long as your new HARP monthly payment is not more than 20% greater than your current payment, specific credit and income guidelines do not apply. The lender will have to determine that the borrower is an “acceptable credit risk” (and what that means is yet to be determined).

Effect on you: A high DTI is not enough to automatically disqualify a borrower. Also, if your family is now a one-income family when it was a two-income family on the original loan, you only have to show proof of one income, as opposed to conventional loans where all borrowers listed on the application must document income."

So with that in mind, my monthly payment is only going up maybe $10-20 a month.

ALSO: When looking over all the paperwork my bank sent me, they actually have a page listed with all my debts from CC's, home loans, and my car payment. They have all my monthly debts listed.

Now they also have my monthly income listed, which lists my monthly pay from my job, but under where it says rental income they do not have the $1000 a month I am getting from the rental. They show a $0 there! So they have my income listed as being $5600 a month where as in reality with the rental income, it would be $6600!

So going by of the paperwork they have for me they show me receiving no rental income, so with that in mind, it tells me I should be ok. I'm not sure where they came up with that, because when I talked to them on the phone, I did tell them about 2-3 times that I do receive $1000 a month in rent.

I'm thinking I should be ok afterall after all that.

What do you guys think????

Thanks