When and how Colorado lenders count rental income from your current home when you buy the next one: signed leases, the 75 percent rule, and what to prepare.
You own a home. You want to move up, or relocate, or convert the current house into a rental and buy the next one. The question is always the same: can the rent I will collect help me qualify for the new mortgage?
The answer is yes, when it is documented and structured correctly. Lenders have established guidelines for using rental income from a property you are vacating, whether that property currently produces rent or will.
A signed lease is the strongest evidence. Once a tenant has signed and the lease is in place, many lenders will count a portion of that rent toward your qualifying income on the new purchase.
If the property is still your primary residence and you are not renting it yet, the lender may use a rental market appraisal or comparable rents to project income. That route typically requires more documentation and lender flexibility, which is where working with an experienced loan officer matters.
Lenders usually apply a vacancy and maintenance factor and count a percentage of the gross rent, commonly around 75 percent, against the property's own expenses. The exact formula depends on the loan program and whether the lender uses the income-offset method or adds the income to your earnings.
Johnny will walk you through which approach applies to your loan type and what your specific numbers look like. No two files are identical, and the difference between 75 percent and 100 percent of rent can change what you qualify for.
A current or prospective lease, your mortgage statement, tax returns that show your income honestly, and a realistic rent number for your area. If you are not sure what the home would rent for, Johnny can help you reason through the market before you commit to the plan.
His advice from years as a landlord: do not inflate the rent to qualify. Lenders verify, and a realistic rent is the one that protects you when the property actually rents.
Colorado mortgage professional, active investor and landlord, and founder of The Real Estate Ladder. He has owned, lost and rebuilt real estate wealth, and now helps Colorado homeowners climb from 0 to 3 properties, one smart mortgage at a time.
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This article is the map, not the walk. Bring your numbers and Johnny will show you the route that fits your income, your credit and your goals.
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