How to Use Boarder and Renter Income for Loan Approval

Are you having trouble getting qualified for an affordable loan?

If you have a renter or roommate, you may be able to use their contributions towards approval. The process can be tricky, but with the right knowledge and a little guidance, using accessory unit, boarder, or co-borrower income could be the boost you need to get approved.

Using Rental, Boarder, and Co-Borrower Income for Loan Approval

HomeReady

If you are having trouble proving that your income is capable of sustaining a HomeReady loan, you may find that the program’s accessory unit and boarder income options give you the flexibility and convenience you need. Fannie Mae has recognized that today’s homebuyers have a diverse range of needs, and they are expanding access to loans for low- and moderate-income borrowers by allowing certain forms of income for qualification. Income from accessory units and boarders is now allowed when applying for a loan. As you might expect, proper documentation is required, but this could be the difference between rejection and acceptance.

To help you understand how you can use these income sources, let’s look at a few specific examples…

Accessory Unit Income

An accessory unit is a separate unit that is identified in the appraisal which has a kitchen and a bathroom. Income from these units can be used under the HomeReady program, but you’ll need to be prepared to meet specific conditions.

Say you and your spouse are looking to purchase a single-unit property that has an apartment, which built over the garage and separate from the main living area. This apartment is fully functional and allows for completely independent living. You also have a potential tenant in place, and this tenant has already signed a lease agreement and will rent the apartment for a specific timeframe after the property is purchased.

In the lease, you have an agreement that the rent for the apartment will be $600 per month (for example). This rental income, even if it has not yet been paid, can be considered when you are qualifying for a loan. However, the amount that can be considered for qualifying purposes is not the full $600, but only 75%, which comes to $450.

According to Fannie Mae’s policy, the any rental income is multiplied by .75 to reach the qualifying number. (The qualifying income is 75% of the total.) They only allow 75%, and not the full rental amount, because there will inevitably be vacancies or loss. By only allowing for only 75%, they compensate for the likelihood that you will have a month or two when no rent money is coming in. (In our example, $600 x .75 = $450)

Boarder Income

A boarder is someone who rents a room in your home or residence and does not have a separate unit with a kitchen, bath, or utilities. For boarder income, up to 30% of the qualifying income that you use for loan approval can come from the boarder. However, you must provide documentation for at least nine months of the most recent 12 months, which is averaged over 12 months. You must also have documentation of a shared residency for the past year.

Sound confusing? Here’s how it might play out…

Let’s say you are a single person looking to purchase a new home. You have had a roommate with shared living quarters for the past 12 months, and your roommate plans to live in the home you will purchase.

The roommate currently pay $450 for monthly rent. You have provided a document that confirms 12 months of shared residency, and also have cancelled checks that document the monthly payments from your roommate, which have come over 10 of the last 12 months.

This boarder income can be considered to help you qualify for a HomeReady loan, but you will have to multiply the monthly total ($450) by the amount of months your received the income (10), which would equal $4,500, which is then divided by a 12 (for total months in a year). The total monthly amount you can use towards your income would be $375. ($450 x 10 / 12 = $375)

These examples are typical scenarios, but every situation is different. For an accurate analysis of your situation, contact an experienced mortgage professional.

Income from a boarder could help you get approved for a loan on a moderate house.

Home Possible

Home Possible, a program from Freddie Mac, also offers the chance to use income from a boarder to qualify. To qualify, the income must be on a one-unit property, which can include condos or PUD’s. Attached apartments, granny flats, or second units on the property are not allowed with the Home Possible program.

To qualify as income, you must verify that you and the boarder will continue to live in the property when you move to the new residence, and you must have resided with the boarder for at least 12 months. Again, the boarder income you use to qualify cannot exceed 30% of the total income used to qualify for the mortgage, and the rent will need to be averaged out over the past 12 months. You can use the same system for calculating that we used in the boarder example for HomePath. The boarder, however, may not be obligated to the mortgage note.

You will need to provide specific documentation that includes rents received over the past year and proof of shared residency, which could be a driver’s license, bill, or bank statement. If you are unable to provide the documents, you’ll have to qualify for the loan without the income from a boarder.

Non-Occupant Co-Borrower

If you are having trouble qualifying, you could consider using a non-occupant co-borrower. This is a person who does not live in the house and may or may not have ownership status to the property, which is indicated in the title. Their income can be used to qualify, but they will need to sign the mortgage. The co-borrower cannot have an interest in the property sales transaction, such as the seller, builder, or real estate broker. This type of borrower, who is usually a friend or family member, can be used in Fannie Mae loans and other programs. 

Get Reliable, Honest Assistance from Our Team!

If you want assistance understanding loan qualification, contact San Diego Purchase Loans today.

We’ll take a common-sense approach to help you get approved for a mortgage loan that fits your specific needs and budget!

Testimonials

I HIGHLY recommend Chad and his team.

Chad and The Chad Baker team really helped me from start to finish with my loan process. They were extremely responsive and provided me updates on a daily basis. I had a few personal issues that they helped me work through so I could get the best loan program and best rate. Very knowledgeable about the industry, rates and trends.I HIGHLY recommend Chad and his team. I’m happy to offer a reference upon request. Please ask Chad for my contact information.”

Chad was very personable. His staff was very suportive.
I had the pleasure of working with Chads team. Everything went as planned. I was very pleased. I still want to take them to dinner. I am completely enjoying my new home”

“Hey Chad – thank you so much to you in particular as well as your team. It’s been a real pleasure working with someone who’s as responsive and helpful throughout the process, as you’ve been. We really appreciate what you’ve done. ”

Outstanding experience

I was referred to Chad by my Realtor for a purchase of a new house. The experience with Chad and the team (I mainly worked with Juliann) was nothing short of outstanding. From start to finish there were always quick to respond and when needed, notify me of any new documentation that was required. There were very helpful explaining to me the pros and cons of different financing options as well as some other loan related issues, such as termite clearance outside the purchase contact and septic tank certification process. Overall, very knowledgeable and processional team. Loan preapproval was done in a single day and loan documents were ready for signing in 21 days, which was 9 days ahead of schedule. That never happened to me before.

“We signed all our papers yesterday afternoon. I wanted to thank each one of you for all your hard work and tenacity in making this happen for Michelle and I. This is by far the easiest closing we have been through. All thanks to you all. You all the best at what you do. No other group works like this together. Again, thank you all, from Michelle and I, we will be forever grateful. Absolutely the best team I have ever dealt with. From beginning to end, the customer service provided was beyond reproach. Everyone gave us their personal attention and that made it so easy.”

“Chad and his team were fantastic. They were incredibly responsive to us and our needs. Chad laid out several refinance options for us, and was very supportive when we decided on the option we felt was best for our family. Chad and his team worked our deal and got our mortgage funded incredibly fast, with excellent service and even took the time to thank us personally once we funded. I can’t recommend Chad enough!”

“Chad and his team are exactly who you want handling the financing of your home. Whether it be a new purchase or refinance, he and his team are one of the most professional, responsive group of people I’ve worked with. Buying a home can be very stressful and Chad and his team took all of the necessary steps to make the process as painless and as quick as possible. They are extremely knowledgeable, organized and have great follow through. You won’t ever be left wondering what the next steps are. I highly recommend him and will use him in all of our real estate transactions moving forward.”

I was amazed how quickly Chad was able to knocked out our refinance!
I highly recommend Chad he & his team did an incredible job! I had 3 others I was working with, including a Credit Union. Chad was able to offer me a lower rate with no fees! Based on the other 3 top financial bids I had for this refinance. ”

“We’re loving our new place and we’re very pleased with how smoothly everything went through closing. Thanks for keeping us up to date on the possibility of refinancing at a lower rate; we trust your judgement as far as waiting until the rate is around 5% lower before we refinance. We’re very interested in pursuing that if rates drop to that level. Thanks so much for all your help and personal attention!”

Excellent service!
My wife and I purchased a home in Escondido, first home together. Chad and his team made the whole process extremely easy and helped us close quickly. Will recommend to all friends and family!”

Thank you, Chad. You have been amazingly responsive to all my questions, and you have a great staff assisting you. Thanks so much for all your help!

Outstanding experience

I was referred to Chad by my Realtor for a purchase of a new house. The experience with Chad and the team (I mainly worked with Juliann) was nothing short of outstanding. From start to finish there were always quick to respond and when needed, notify me of any new documentation that was required. There were very helpful explaining to me the pros and cons of different financing options as well as some other loan related issues, such as termite clearance outside the purchase contact and septic tank certification process. Overall, very knowledgeable and processional team. Loan preapproval was done in a single day and loan documents were ready for signing in 21 days, which was 9 days ahead of schedule. That never happened to me before.

“Juliann – Thank you very much for your patience and help with everything. I can say 150% that we could not have gotten through this without you. I have been through this process before a few times BUT never have received this type of care/attention. This process is intense and you managed to humanize this life changing experience for us – rather than being a loan number. If you or Home Point ever need an official recommendation from us, you can count us in.”

Excellent customer service – highly recommended!. I was referred to Chad by one of my friend. During our initial meeting, Chad walked me through the lending process and provided multiple ideas to start the home search. He got me pre-approved in couple of days. After looking for months, we finally liked a house but it was over our budget. He came up with an intelligent financing strategy and provided an excellent rate that let us purchase our new house. Chad and his team are patient, professional and always available – literally 7 days a week, 24×7. I can’t remember the last company I worked with that returned calls and emails in such a timely manner! I will happily recommend him to others.”

Chad and his team are fantastic!

Chad and his team assisted me with the financing of my condo. Every member of Chad’s team was extremely professional, highly competent, super responsive, and friendly. They realize that financing a home can be a stressful experience and they do their best to alleviate that stress by keeping you in the loop on everything. They were great about giving me frequent updates on the status of my application. In addition, they happily answered my questions. At one point, when I felt like I was pestering Chad with questions, his response was a friendly, “keep them coming!” And he meant it!!! Likewise, Maria and Karina were just a pleasure to work with as well! This team is like a fine-tuned machine. Thank you so much for all of your help!!!

“Chad and his team got me funded in less than 30 days, completing a deal that another broker fumbled around with for almost 90 days. Effective, efficient and excellent communication skills. Outstanding professionalism.”

EXCEPTIONAL, SUPER EXCEPTIONAL! The most professional, accountable and committed mortgage service we have ever worked with. With numerous experiences in buying and refinancing homes, by far Chad Baker and his team remain at the top of our list. We feel very blessed to have located such a committed company who serve their clients with an exceptional first “first class” mindset.

“Chad, Juliann and the team were great in helping me get through this process. It is not an easy process but they stayed with me the entire time and I am truly grateful. ”

“Thank you for all the hard work (even on weekends!) you and your team have devoted to seeing this through in a very efficient manner. It’s been an easy process for me and, you and your team have been a delight to work with.”

Chad Baker and his team are amazing!

My husband and I found Chad through an article he had written. Every aspect of working with Chad and his team was exceptional. From our initial phone call where he explained the many options we had, to advice he gave in dealing with somewhat challenging sellers, and closing our loan ahead of schedule, the loan process with Chad and his team went very smoothly. I especially appreciated the one-on one guidance from Juliann, who really made me feel like I was her only client. I look forward to working with Chad and his team again and would highly recommend them to anyone looking for a mortgage.

“Chad – Your team has been nothing short of amazing. Juliann has aggressively followed-up with escrow and gone out of her way to make sure things get done on schedule. Matt and I can’t express to you enough how much we’ve appreciated all of your counsel at the beginning of the process and her execution to see it through to close. As always, appreciate everything that you guys have done to see this through.”

I highly recommend Chad Baker. He does a phenomenal job and won’t trauma you or your clients. He has a whole team that works on the loans. And all the team members are great. He has a person that can translate for your clients that are Chinese. He is as good of a loan officer as you are an agent, and that is what you want when referring clients to a lender.

Excellent service!. Recently purchased a property in Northern San Diego County. Chad and his team were recommended to me to check out. The rate he acquired was a full point & a half better than the Broker I have been using for years. His team was exceptional and did great follow through. Definitely 5 star service!”

“Chad and his group made the mortgage approval process smooth and understandable. Multiple updates and explanations during the process kept me informed of progress. Chad also provided great advice on other home services, in particular an insurance company that saved me thousands of dollars a year on home and auto insurance.”

Incredible Turnaround and Stellar Customer Service. Chad and his team helped us get into our first home here in San Diego. When we first started the process we were skeptical it would even be worth applying. But Chad and his team walked us through the whole lending process with integrity and know how that surpassed our expectations. After helping us to pull together our pre-qualification, he and his team stayed at the ready. Before we even walked up to a home we were seriously interested in he had the data we needed over to us and our realtor. After finding the home we wanted to place a bid on, we were able to place a bid with a matter of a few hours. Then, after having our offer accepted, he had our loan package completed and the keys in our hands in under a month — I am pretty sure it was less than. Like I said, incredibly fast and professional turnaround. if you are looking for a motivated lender who can walk you though every detail and have your back every step of the way, Chad and his team at HomePoint Financial is your best decision. Recommend them highly!”

“Good experience

I recommend chad because he is not pushy or trying to manipulate as others in the same business, the process was smooth with no obstacles, best team. ”

“I must say I was extremely impressed with the professionalism and quick response from Chad Baker & his entire team. I screened over 5 lenders before selecting the Baker Team & boy am I happy customer. It’s evident that customer service is a priority for these folks.”

“Chad and his entire team were over the top amazing, professional, and attentive throughout the entire home loan/buying process. I could not have asked for a better team to have on my side through what could be one of the most challenging and stressful processes one experiences. From the first conversation I had with Chad, I felt comfortable with him. He helped guide us through the process without ever once making us feel uneasy, unimportant, or uninformed. I never felt silly or stupid for asking the same questions over and over until I fully understood what we were getting into, or until something made total sense to me. The home loan world is fast paced, overwhelming, and confusing, and Chad and his team held our hands and helped us to feel comfortable and confident about our choices. He and his team were always there for us day or evenings, weekdays, or weekend and never made you feel like you were a bother if you had a burning question you had to get answered at 8pm Saturday night. I will use them again and again, and suggest them to any friend, family, or acquaintance. Seriously, they are rock stars. They work hard for you to get you into your dream home, we could not be happier with their hard work, dedication, and kindness.”

“Hey Chad, Just wanted to send a quick note to Thank You for all your work and effort to get this escrow closed. It was a pleasure to work with someone as professional as yourself. If I have a client that ever needs a lender you will definitely be someone that I  would recommend.”

Great Job Chad Baker Team & Homepoint!
I was very impressed with the professionalism and quick response times from Chad Baker & his team during the entire process. I would highly recommend Home Point for mortgage needs. Great Job! ”

Everything about our transaction with this lender was perfectly explained to us, easy to do, and they were able to help us get our loan closed ahead of schedule. It was a perfect 10 and we couldn’t have been happier with the whole thing

When looking for a house, we had couple recommendations for a lender. After talking with all the lenders, many were difficult to work with and couldn’t get it done as quickly as we needed. I was referred to Chad Baker’s team and I am glad we did. Not only did they get the things done quickly for us, they were very easily to get ahold of. It wasn’t rare to get a response within 15 minutes whenever an email was sent. I could not express how friendly and outgoing this team is. And on top of that, they came back with the best offer for us amongst all the other brokers. I am glad I worked with these guys. If you are looking for a lender…MAKE SURE TO CALL CHAD BAKER AND TEAM!!! Thanks Chad for all your hard work. Next time we buy another house I am calling you first!

“Chad and The Chad Baker team really helped me from start to finish with my loan process. They were extremely responsive and provided me updates on a daily basis. I had a few personal issues that they helped me work through so I could get the best loan program and best rate. Very knowledgeable about the industry, rates and trends. I HIGHLY recommend Chad and his team. I’m happy to offer a reference upon request. Please ask Chad for my contact information.”

highly recommend Chad and his team. They were always available for any questions, concerns etc. we had. The process to close the loan went super fast. Chad and his team always went above and beyond. The customer service was the best! I will definitely recommend to all Thank you again for everything!

I was amazed how quickly Chad was able to knocked out our refinance!. I highly recommend Chad he & his team did an incredible job! I had 3 others I was working with, including a Credit Union. Chad was able to offer me a lower rate with no fees! Based on the other 3 top financial bids I had for this refinance. ”

“I wanted to reach out and tell you both Thank You for working so hard on my loan. I really appreciate how much effort you both put in to make it happen! Top notch, one of the best I have ever seen in the business.”

Thank you Chad and Team

Chad and his team have been a pleasure to work with. I’m a 3rd time home owner. Wish I had known Chad and team a lot sooner. He made my 3rd home purchase very easy. There were a lot of moving pieces and they handled with professionalism and care. Juliann was a pleasure to work with too. The whole team made it possible for us to move into our dream home. Thanks you Chad and Team!

“This is the second time that I have worked with Chad (home purchase & refinance). He has become my subject matter expert and someone I depend on for all finance needs related to our home and real estate investments. My favorite things about Chad are his depth of knowledge, responsiveness, honesty and the great service he provides. I have referred countless friends and family of mine to work with him for no other reason than I know that he will treat them well and equip them for the best possible outcome. Chad will add tremendous value to any real estate transaction that you have and I am grateful to have him as a resource.”

An ‘A’ Team!
We just closed on our second transaction with the Chad Baker team. They are very well organized and I can attest that they are looking out for their clients’ best needs. A special shout-out for Juliann B. who was our guide through the painful loan process. We found Juliann to be very responsive, kind, patient, and diligent in getting both our refis closed well.”

“Chad, it was a pleasure working with you. Your loan was smooth, speedy, and we were kept well informed. I will make sure to prioritize offers where you are the loan officer as I know they run smoothly.”