How to Use Roommate & Rental Income to Qualify for a Mortgage

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2:32Output is for informational purposes only, and it's not an investment recommendation or advice. Complete disclosures available at public.com slash disclosures. If you have a swimming pool, I'm not sure if you guys, have you ever heard of a thing called swimpli? No. Is that when you rent the pool? You can rent, you can rent your, you can rent out your backyard. Yeah, yeah, yeah. Right. You can rent out your backyard. You can rent out your pool. like I have one of my mentees, every year she rents out her backyard, her pool here in New York, and it pays her mortgage for the year. It's incredible, right?

3:03Because people treat that like an event space for the day, right? So you can have somebody's backyard for eight to 10 hours, and you're paying$200,$300 an hour for the full use of their backyard and their swimming pool. So there's so many different ways to house hack and generate money with a single family or a duplex to make it more affordable. Now, also, here's another thing that people don't really realize is that border income, a.k.a. if you have a roommate, what people don't know is Fannie Mae will allow you to use this border income to help you qualify for a mortgage under the Fannie Mae Home Ready program.

3:48Now, the requirements is the borrower must have a history of receiving that rental income for at least nine of the past 12 months. And you need documentation such as your lease agreement and show proof of receipt that your roommate has been paying you to or since you live in an apartment together. And then you can use that income to help you qualify for a mortgage. So to break that down just in quick layman terms, if you are living with someone right now and you have a lease and they're on the lease with you, if they're your bona fide roommate, not just someone who just in the house and you say, hey, they live here.

4:27No, they have to be on your lease. If you know you are in position to qualify for a mortgage faster than they are, what you should do is collect the money, their portion of the rent money from them, tell them to sell it to you, cash app it, whatever it is, and make sure you put that is on the memo, January's rent, February's rent, March rent, right? So we can document it that they've been paying you. And then you go ahead and pay your landlord from your account. If you do that nine months out of the past 12, then when you go qualify for your mortgage, you can use that rental income as part of your income to help you qualify for your mortgage.

5:14Y 'all got where I'm going with this? I see where you're going with this. Documentation is important. Making sure you're keeping records is important. and that goes for if you're buying an individual home but even more so in this situation when you're trying to have investment property. You've unlocked something here. Let's go back a little bit. Alright. If you're in a relationship with somebody and we talk about 50-50 a lot on these different shows and podcasts but that's the real thing though where somebody lives with somebody and they're contributing. They're contributing to something. But most of the time, they're just giving a person money.

5:54So it's usually either male or female, somebody has a lease in their name and they meet somebody and after a while, and then that person just kind of ends up living with that person. They may not never be on the lease. Correct. And they're contributing financially on a certain level, but there's no real documented record of them contributing financially. Correct. So you're saying that boyfriend, girlfriend, whatever, you're living with somebody, that should be something that's documented because if it is documented, then what is it called? So it's border income, right? So if in that same situation, you have the girlfriend, let's just say the boyfriend and the girlfriend moves in, right?

6:39Let's say that situation, the lease is in the boyfriend's name, but y 'all splitting it 50-50 as Rashad said, The girlfriend is not on the lease. Boyfriend is in position a year from now. He wants to go buy a house for them to live in. He should now put her on the lease of the apartment. And then now when she's making that contribution, don't make it on make it cash. She should sell him a wire transfer, a cash app, put on the memo. It's for her portion of the rent. as long as we have that document, nine out of 12 months. And then now the boyfriend goes to get pre-approved and says that, Hey, this is my roommate.

7:26She is going to live in the house with me. Now from a lending perspective, I can use the portion of that rental income that she's paying. Let's just say it's a thousand dollars a month. I was going to say clean, clean number, a thousand dollars a month right on the memo i'm putting five hundred dollars in toward that at the end of the year let's say it's the 12 months now it's an additional six thousand dollars that you have in income correct that's now is going to be used for the boyfriend during his pre-approval to help them qualify for more of a house it's it's a clean way of of qualifying with using this roommate income because you're roommates, right?

8:12At the end of the day, you're not legally married. You're technically single in the eyes of the law. Boyfriend and girlfriend is not a marital status, right? Last time I checked. So you're legally single. This is your roommate. So if you do it that way, now that rental income can now be used to help qualify for a mortgage. Now, I know some people are going to say, why won't she just go on the mortgage with him? Because now we talk about divide and conquer. Let's just say now they move into this house, they get approved, and they wind up separating, right? Now, she doesn't have a mortgage in her name, she can still go out here and buy a duplex, a single family and house hack her life away as well.

9:05So just depending on your circumstances and your situation, if you understand real estate financing and these programs that are out there, and if you set your documentation up the right way, you can really go out here and scale at a very high level and reap all the benefits of wealth building with real estate if you know exactly what you're doing. That's a very vital play, man. I never heard that. I'm glad you wrote that down. It doesn't have to be boyfriend and girlfriend either because there's a lot of scenarios where somebody lives with somebody. It could just be with college roommates. Can it be parent-child?

9:41No, it can't be parent and child. But let's think about college roommates. Think about what's just happening. May and June, we have all these college graduates. Most of them have what? Roommates for the majority. So first of all, if you just graduated college, congratulations, right? But did you know that you can use your college education as your work history and you don't need a two-year job history, you can use your college history as work history. Did you guys know that? Say that again? So you just graduated from college, you did your undergrad, right? Four years, you're 22 years old, you're graduating, you just got a job offer from, you know, Earn Your Leisure Entertainment.

10:25You're going to start and you're going to be the marketing manager. You're making a base salary at$100 ,000 and you have an offer letter from Earn Your Leisure Entertainment to start August 1st. You don't need to work at Earn Your Leisure Entertainment for two years. You have your college history for four years. That's your work history. You can now present that offer letter and your first pay stub and you can buy a house immediately. So you can use college as work experience? Absolutely. Has that always been the case? Absolutely.

11:03Absolutely. Right. And now if you freak it, you got that college history. Four years, You got your degree. But during college, you have a single family home that you was renting out. And now your roommate is on a lease. If you do what we just said with the boyfriend and girlfriend scenario, now your roommate starts paying you and you know you have a better chance of getting the house faster than them. Have them pay you. Now, first of all, everybody got to be on the same page with this, right? Everybody got to be a team effort here. So now they pay you instead of paying their portion of the rent.

11:42You pay the landlord. And now you can use that border. Not only can you use the offer letter from On Your Leisure Entertainment, you can also use that roommate income to help you qualify because now that roommate is going to move into your house with you as well and continue to be a roommate. And that offer letter is kind of one of those things that you kind of need to have in order for this to work. You can't just go out. We need to show that you got a job. Right. Right. We need to show that you have a job and it's a start date and you can go ahead and get pre-approved. But one of the pre-approval conditions is going to be, hey, when you get into contract, we need to know that you're working now.

12:24We need to see pay stubs from Earn Your Leisure Entertainment, as we use in that example, to show those pay stubs. So that way now, and it matches up with the income from the offer letter, then boom you use that long as your credit is good your dti works you don't have to wait two years to qualify yeah that's a good hack because there's a there's plenty of college students who there's three roommates but there's the one person who gets the lease right if that person now looks at those two and that you're just saying it for one roommate yeah actually that could be two or three roommates that are paying them so that documentation port becomes even more important Exactly.

13:02But the key is everybody has to be on a lease. Right. Everyone has to pay you. And then everyone has to be moving into your house because now it's border income, roommate income, and we're using that to help qualify. So it needs to sustain to the new house. Right. The key. So if everybody's on the same page, this could be a home run. But here's how we even go a little bit deeper with this pause. If you buy a home that has an ADU, an accessory dwelling unit on it, right? Everybody type ADU in chat. If you have an ADU, you can use rental income from an ADU and it can help you qualify. So let's just say, for example, you don't have the roommates, you live by yourself, but you just graduated college and you want to use that college degree hack.

13:58Right. But you might be short with rent with income to qualify. You find a house that has an ADU and we can use that rental income from the ADU to help you qualify as well. and when you get into the adu now we're going to use long-term rental income to help you qualify but that does not mean you have to have a long-term tenant you can now turn that adu into an airbnb play vrbo you can make it a content studio there's so many different things you can you can target midterm renters like traveling nurses like flight attendants like depending on which city you live. So if you live close to airports, you live close to hospitals, right?

14:47You should be targeting homes that are closer in proximity to these areas because the midterm rental income from corporations, right? You have people who travel for corporations. They may need someone to stay for six weeks because they're doing a corporate project in a certain city. Think about what's happening. And guys, I'm going to tell you another hack. And I've talked about this on my programming I know you guys talked about. Look at all the AI data centers that's being invested and built all around the country, right? You got Texas. I think there was two or three, half a billion dollar projects that was launched this year.

15:23Think about it. These people are not, the people who are constructing this, they're not going to be long-term residents of Texas, right? They're probably coming in from all different parts of walk of life. So what do they need? Rentals. They might only be out there to do a job that's going to take six months. So what do they need? A midterm rental. They don't want to sign a year lease or a two-year lease. They may need only a six-month lease, eight-month lease, and it's going to be cheaper than the corporation is putting them into a hotel because that daily rent at a hotel, that shit going to add up.

15:55You know what I'm saying? So you got to really take the current events and everything that's happening i know you guys talk about it at scale on market mondays that's why you need to tap in every monday 8 p.m eastern standard time to see what is moving and shaking because all of these moves that's happening in ai those are also real estate plays too if you're paying attention earners what's up look let's face it most guys just power through pain and strains but the smart move is taking action early before it turns into something bigger that's where a physical therapist comes in. They can assess what's really going on and create a plan tailor specifically for you.

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