The Importance of Shelter Payments - Underwriting Fundamentals 101
Shelter Payments
It is very important to factor in a shelter payment when we're running your application.
Now, I disagree with the shelter payments.
Some of the lenders charge an outrageous amount of shelter, shelter payment that we have to use on the application.
What a shelter payment is, as a payment, we have to factor against the claim, even if they live with their parents and say they're buying a rental property or a cottage, something like that.
We have to factor in a shelter payment or a cosigner being on the mortgage and maybe they live with somebody and they're not in the title of a home.
They don't even pay anything.
The lenders still make you felt a factor in a shelter payment.
So each lender has their own the lowest shelter payment I've seen that with a lender is $300 a month where some lenders make us use what's called fair market rent.
So they'll have an appraiser say what it would cost to rent in that area, and they'll use that.
So in some cases I've had the news like $1800 or $2200 a month shelter payment.
So what happens is say you're buying a rental property and you live with your mom.
This is the scenario.
What happens is we have to use a shelter payment as a liability.
So it's acts like a debt, even though you don't pay anything because you live with your mom.
This is how the lenders are required to do it.
Again, I think it's a little silly, but it's super important to know that every lender has their own shelter payment.
So as an investor who's not moving into this property that maybe does live at home or they live with their girlfriend, but the girlfriend owns the home or they're married, but they're not on title, right?
In those cases, we have to use a shelter payment.
Which can really diminish your pre-approval.
So again, it's super important to know all the shelter payments of all the lenders to maximize your client's approval. All right, guys, thanks for coming.
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