Recently I was unable to purchase a house ( for rental ) in the Dallas/Fort Worth area of Texas. Price was $85,000. I went through a couple mortgage brokers and a regional bank in California were I reside.
Debt to income ratio was the primary problem.
Here is some personal info:
I currently reside in california
I have 4 houses in Dallas/Fort Worth, all purchased in the last 18 months, all leased out.
FICO is 750
I can put down up to 25%
Anyone have specific banks they would suggest that would do portfolio lending for investment properties in Texas? I believe I dont meet FNMA guidelines for the loan being transfered.
Hi, Scott -- can you clarify, as saying "portfolio lending" and "FNMA" in the same breath seems a bit confusing. Are you saying that the portfolio lenders simply underwrite to FNMA standards but don't resell? How long of a fixed rate term will your "portfolio lender" go?
Are you also saying that rental income can only be used for qualifying if it appears on your tax returns for 2 years? IOW, you can't use the rental income from your subject property on a purchase, even if leased?
Eric,
I'm in the same boat. I also live in California and have properties in Texas and Alabama, My "day job" is a freelancing in the entertainment industry and I work out of my corporation so to minimize the tax impact I pay myself as little as possible therefore my DTI ratio is poor. It's easier to get approved for a $24-30K mortgage, but when you deal with higher numbers (Texas style) it is harder. I recently approached Colonial Bank in Birmingham and they do their own underwriting and seems to take to account sole proprietary corporation's income. But it seems that most of the bank are scared of auditing and the guideline this days is very stringent.
Unfortunately, this is the new game in town. Ever since the great debacle and the demise of stated income. DTI is one of the main components in underwriting. The only way to maybe get around it is to increase your DP to 35%-45% and even that don't guaranty financing.
I notice that this thread was started about 18 months ago but wanted to respond anyway.
I represent 2 different mortgage lenders that would go over 4 FNMA properties and have a Portfolio Lending program up to 10 FNMA investment SFR properties.
Generally, they will go up to 75% LTV on Purchase. Require 2 years tax returns fully documenting all income & rental income. Require 6 months Reserves (PITI) on all investment properties owned and require a minimum 720 FICO.
Let me know if you need any additional information.
Hi, Scott -- can you clarify, as saying "portfolio lending" and "FNMA" in the same breath seems a bit confusing. Are you saying that the portfolio lenders simply underwrite to FNMA standards but don't resell? How long of a fixed rate term will your "portfolio lender" go?
Are you also saying that rental income can only be used for qualifying if it appears on your tax returns for 2 years? IOW, you can't use the rental income from your subject property on a purchase, even if leased?
Your right I wasn't very clear; however, you were reading my mind. Yes, two of the portfolio lenders that I am able to lend funds through will lend on up to 10 investment properties and they do underwrite based upon FNMA underwriting standards (automated Desktop Originator findings).
Regarding rental income qualification for a Borrower's investment property(s), yes, you are correct in that 2 years tax returns must be provided showing the rental income on a separate schedule (forgive me but the letter escapes me at the moment). So if your getting cash receipts from a tenant and NOT reporting it, then it can't be used as qualifying income. Also, you should be able to use the income on your primary residence if it is fact leased with an in place lease agreement and it reports on your tax return. That would be counted as one of your up to 10 properties.
Thanks Scott, good to have another lender to help answer quesions.
The remaining questions I still had:
* How long of a fixed rate term will your "portfolio lender" go?
* Can you count the income on a new subject property you're purchasing (by definition it never will have showed up on your past Sch. E's, since you didn't own it)?I'm not referring to my primary residence.
* Can you count the income on other properties you already own if they've been purchased in the prior year and you have no tax return data on them?
Scott, i own 10 properties five of which are financed I will belooking to purchase another in May. how do i get incontact with you so i am prepared for the purchase later on. i would like to discuss terms and other issues. thanks
Abbas
1. Lender will do 15 & 30 Year Fixed rate fully amortizing product. My other lender will do the same terms plus a 5/1 ARM product as well.
2. If you purchase an investment property, rental income can be used – will need to document the rental income by obtaining an appraiser’s opinion of market rent and copies of current lease agreement. The gross rental income from the property is equal to the lesser of the market rent established by the appraiser or the current rent based on existing lease agreement.
3. For rental properties you already own where the rental income does not appear on the Schedule E yet, you would need to document a current lease to show gross rental income.
Abbas ~ you can reach me directly at [REMOVED] or send me a PM.