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

Summary

Comprehensive Summary of "Earn Your Leisure" Podcast Episode: How to Use Roommate & Rental Income to Qualify for a Mortgage

Release Date: June 25, 2025

Hosts: Rashad Bilal and Troy Millings
Podcast: Earn Your Leisure
Episode Title: How to Use Roommate & Rental Income to Qualify for a Mortgage

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Introduction

In this insightful episode of Earn Your Leisure, hosts Rashad Bilal and Troy Millings delve into innovative strategies for leveraging roommate and rental income to qualify for a mortgage. Tailored for aspiring homeowners and real estate enthusiasts, the discussion bridges financial savvy with practical real-world applications, blending business acumen with pop culture relevance.

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1. Exploring Roommate and Rental Income as Mortgage Qualifiers

The episode kicks off with Troy Millings introducing the concept of "swimpli"—a method of renting out personal assets like pools and backyards to generate additional income. This segues into the broader topic of house hacking, where homeowners can make their properties more affordable by renting out parts of their residences.

Notable Quote:

Troy Millings [01:25]: "You can rent out your backyard, you can run 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."

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2. Understanding Border Income and the Fannie Mae HomeReady Program

Troy Millings elaborates on border income, specifically focusing on rental income from roommates and how it can be utilized under the Fannie Mae HomeReady program to qualify for a mortgage. This program allows borrowers to include confirmed rental income in their mortgage qualification process.

Key Requirements:

• Rental Income History: Must have received rental income for at least nine of the past twelve months.
• Documentation: Includes lease agreements and proof of rent payments.

Notable Quote:

Troy Millings [02:50]: "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... you can document it that they've been paying you, and then you can use that rental income as part of your income to help you qualify for your mortgage."

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3. Documenting Rental Income: Practical Steps

Rashad Bilal emphasizes the importance of meticulous documentation when utilizing rental income to qualify for a mortgage. Proper records ensure that the additional income is recognized by lenders, thereby enhancing the borrower's eligibility.

Steps Discussed:

• Lease Agreements: Ensure all roommates are on the lease.
• Payment Documentation: Collect rent via cash app, wire transfer, or cash.
• Consistent Payment Records: Maintain records indicating regular rent payments.

Notable Quote:

Rashad Bilal [03:58]: "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."

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4. Relationship Scenarios and Rental Documentation

The hosts explore various living arrangements beyond romantic partnerships, such as college roommates, and how these can be structured to utilize rental income for mortgage qualifications.

Scenario Example:

• A boyfriend and girlfriend living together with the lease in one person's name.
• Transitioning the non-leased partner onto the lease.
• Structuring rent payments to document income contribution.

Notable Quote:

Troy Millings [05:11]: "So it's border income. Right. So if in that same situation, you have the girlfriend... you 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... and make sure you put that is on the memo. January's rent, February's rent, March rent."

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5. Utilizing Accessory Dwelling Units (ADUs) for Rental Income

The conversation transitions to leveraging Accessory Dwelling Units (ADUs) as a source of rental income. ADUs can serve as long-term rentals or be utilized for short-term rentals like Airbnb or VRBO, providing flexible income streams that support mortgage qualifications.

Applications of ADUs:

• Long-Term Rentals: Stable, ongoing income.
• Short-Term Rentals: Catering to midterm renters such as traveling nurses or corporate project teams.

Notable Quote:

Troy Millings [10:22]: "If you buy a home that has an ADU, you can use rental income from an ADU and it can help you qualify. You can turn that ADU into an Airbnb, play VRBO, make it a content studio... targeting midterm renters like traveling nurses."

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6. Leveraging Current Events: AI Data Centers and Real Estate Opportunities

Troy Millings highlights the importance of staying attuned to current events and industry trends, such as the expansion of AI data centers, which create demand for midterm rentals. Recognizing these trends allows homeowners to strategically position their rental offerings to meet market needs.

Strategic Considerations:

• Location Proximity: Positioning properties near data centers, hospitals, or airports.
• Rental Flexibility: Offering varying lease terms to cater to transient professionals.

Notable Quote:

Troy Millings [14:50]: "All of these moves that's happening in AI, those are also real estate plays too, if you're paying attention."

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7. Closing Insights

In wrapping up, Rashad Bilal and Troy Millings reiterate the significance of understanding and strategically utilizing rental income to enhance mortgage qualification prospects. They encourage listeners to adopt a team-oriented approach, ensuring all roommates are documented and aligned in financial contributions.

Final Thoughts:

• Team Effort: Ensuring all parties involved are on the same page regarding financial arrangements.
• Long-Term Planning: Utilizing rental income not just for immediate mortgage qualification but also for sustained wealth building through real estate investments.

Notable Quote:

Rashad Bilal [15:44]: "Pay off via virtual prepaid card. Allow 15 days credits and balance due if you pay off early or cancel."

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Conclusion

This episode of Earn Your Leisure offers a wealth of practical advice for individuals seeking to navigate the complexities of mortgage qualification through innovative income streams. By effectively documenting and leveraging roommate and rental income, listeners can accelerate their path to homeownership and build a robust foundation for future financial success.

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Note: The episode includes advertisements and promotional content from Progressive Insurance, PNC Bank, T-Mobile, and Remarkable, which have been excluded from this summary to maintain focus on the core discussion.

Transcript

[Rashad Bilal]

Earners. What's up?

[Troy Millings]

Look.

[Rashad Bilal]

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[Troy Millings]

If you have a swimming pool, I'm not sure if you guys. Have you ever heard of a thing called swimpli?

[Unknown Speaker]

No.

[Rashad Bilal]

Is that when you rent the pool.

[Troy Millings]

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 run 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. Like it's, it's incredible, right? Because 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 two, $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, AKA 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 HomeReady program. Now, 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 since y' all lived 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's just in the house and you say, hey, they live here. No, 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. 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 to. 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. Yeah, I got where I'm going with this.

[Rashad Bilal]

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.

[Unknown Speaker]

So you. You might not. You've unlocked something here. Let's go back a little bit. Oh, all right. If you're in a relationship with somebody, Right. And we talk about 50, 50 a lot. Right. On. On these different shows and podcasts. But there. That's a 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. So 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. They're contributing financially on a certain level, but there's no real documented record of them contributing financially.

[Troy Millings]

Correct.

[Unknown Speaker]

You're saying that boyfriend, girlfriend, whatever, you're living with somebody. That should. That should be something that's documented. Because if it is documented, then what is it called?

[Troy Millings]

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? Let'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 zell him a wire transfer, a cash app, put on the memoir. 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. She 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.

[Rashad Bilal]

As I was gonna say clean, clean number. A thousand dollars a month right on the member. I'm putting $500 in toward that.

[Troy Millings]

Yeah.

[Rashad Bilal]

At the end of the year, let's say it's the 12 months now it's an additional $6,000 that you have in income.

[Troy Millings]

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 your roommates right at the, at the end of the day, you're not legally married. You know, you're technically single in the eyes of the, of the law. Boyfriend and girlfriend is not a marital status. Right. Last time I checked. So you're, 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, why won't she just go on the mortgage with him? This 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. So 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. Because building with real estate, if you.

[Rashad Bilal]

Know exactly what you're doing, that's A very vital play. Man, I never heard that. I'm glad you broke that down before.

[Unknown Speaker]

It doesn't have to be boyfriend, girlfriend either, because there's a lot of scenarios. Somebody lives with somebody.

[Troy Millings]

It could just be your college roommates.

[Rashad Bilal]

Or it could be, could it be parent, child?

[Troy Millings]

No, it can't be parent and child, right? But let's think about college roommates. Think about what's just happening May and June. We have all these college graduates, right? 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, your college education as your work history? You don't need a two year job history, you can use your college history as work history. Did you guys know that?

[Unknown Speaker]

Say that again.

[Troy Millings]

So you just graduated from college, you did your undergrad, which. Right. Four years, you're 22 years old, you're graduating. You just got a job offer from, you know, Earn your leisure Entertainment. You'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.

[Rashad Bilal]

So you can use college as work experience.

[Troy Millings]

Absolutely. Absolutely.

[Rashad Bilal]

Has that always been the case?

[Troy Millings]

Absolutely. Okay. Absolutely. 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 gotta be on the same page with this, right? Everybody. It got to be a team effort here. So now they pay you. Instead of paying their portion of the rent, you pay the landlord. And now you can use that border. Not only can you use the offer letter from Earn 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.

[Rashad Bilal]

And that offer letter is kind of one of those things that you kind of need to have in order for this to work.

[Troy Millings]

You can't just go, we need to we need to show that you got a job, right?

[Rashad Bilal]

Right.

[Troy Millings]

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 just, you, you're working. Now we 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. As long as your credit is good, your DTI works, you don't have to wait two years to qualify.

[Rashad Bilal]

Okay, 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.

[Troy Millings]

Yeah.

[Rashad Bilal]

Essentially that could be two or three, three roommates that paying them. So that documentation becomes even more important.

[Troy Millings]

Exactly. But 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 a 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, right? 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 a 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 what city you live. So if you live close to airports you live close to hospitals, right? You 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 gonna tell you another hack and we've, I've talked about this on my program and 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. Think 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 leave, eight month lease. And it's going to be cheaper than the corporations putting them into a hotel because that daily rate of the hotel, that shit going to add up. You 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, 8pm Eastern Standard Time to see what, 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.

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[Troy Millings]

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