Hi, I received an inheritance a few years ago and purchased a property with it in which I rent on a month to month basis for $1600. i have $55-$60k I'm willing to put down for a down payment. my question is: is it possible for me to qualify for a loan and use my income from my home to pay for mortgage and other fees? I have only been working since April 2014. is my only option to continue to work? thank you for reading.
Answer,
There's a lot of vagueness to this question; For instance, you don't specify how much of a home are you looking to buy or much of anything of your current situation, other than you have a large amounts of savings. Also, does the property you purchased with your inheritance also has a mortgage attached to it? I would think it does so basically I believe you are asking if you could pay for two mortgages based on solely the $1600 month rental income you receive because you want to leave your job ('is my only option to continue to work?')
Quick answer. No.
Longer Answer; Why I say that - let's say you buy something small in a small town, like a condo that lists for $150,000. The minimum 5% down is $7500. Let's add in the extra expenses roughly and say with fees and such you pay $10,000. You now have a house with roughly a $142000 mortgage. Let's make your mortgage $700/monthly on a 25 year amortization. You have income of $1600 coming in (assuming there is no mortgage) leaving you with $900 a month revenue and your savings of roughly $45,000.
A lender would think positively on your original application only if you have your tenants under some type of long-term contract - not just a verbal month-to-month agreement. You would need to have to have them sign something. Your work history is short so the will want to see two years of taxable income so your rental income has to be declared as well. They will want to see at least a 3 month history of your savings in your bank account, or a letter from a trustee/lawyer declaring it to be an inheritance and not, say, from drug smuggling. Also, you give no indication of your credit score, which is evidence of you being able to go into debt and repay it on a convenient monthly schedule. Why should a lender believe you would pay them back that $142,000?
Now it sounds like you want to quit your job and live off that $1600 a month (which being month to month would be considered a 'high-risk' income; what do you do if the renters leave without notice?) while maintaining 2 houses. How long do you see this working out? Poverty line in Canada is around $20,000/yearly, which is where you would be without your job. You would have to find a way to pay for 2 sets of property taxes, 2 sets of repairs, 2 sets of utility bills (if your renters suddenly move out which they could as you don't have them under contract). This doesn't even include your own personal expenses, such as transportation, education, food, clothing, etc.
While $45,000 in savings sounds like a lot, truth is it's not that much of a safety cushion if you are not steadily replenishing it via employment.
I hope that helps to give you an idea where you stand and what lenders consider when approving mortgages; for more information give me a shout and I can go through this in better detail as you provide me better detail.
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