Just starting out - looking for guidance

7 Replies

I want to start out by saying I really appreciate all the insight this community has given me prior to joining.  Also if this post is in the wrong forum feed I apologize.

I purchased my first property in 2012.  The property is a duplex were i have lived on one side and rented out the other for the last two years. I want to start to acquire more investment properties but I am unable to finance anything. I am at the peak of my debt to income ratio.  I have heard that some lenders are willing to use a percentage of the potential income to help satisfy the underwriting process but i get mixed messages from the Banks.  Are cash deals all that I can do until I start to reflect more income?

Background: Clean credit, Solid career history, and capital for the down payment.   

Pay down your debt first! Real estate deals are not going away. That debt will be a thorn in your side.  

It does not hurt to shop around. Interview more lenders and explain your situation. From personal experience, I've learned a lot just by doing research and shopping around. 

Best of luck! 

@Michael Wintercorn You are going to have your best luck shopping around with Local lenders. You will likely need to be looking in the commercial, not the mortgage department of the bank. You could be able to get a signature loan depending on your situation and relationship with the bank.

Also, start hunting for deals. When you find a good deal, the money will likely come next. People get motivated to lend on great deals, not average ones to people with a less than perfect financial statement. Who knows part of the great deal might be that the owner is willing to carry. 

Stay hungry. Good luck. 

I am hesitant to pay the debt down because I was able to take advantage of the record low interest rates in 2012.  I have a fixed 30 year for 2.9 percent.  Am I crazy not to pay that down? Versus investing the cash into other avenues that yield a higher return. 

@Michael Wintercorn is your debt to income off on the property or your personal debt?  I wouldn't pay down that mortgage.  That is a good loan.  Clear your personal debt off...

If that mortgage is the only debt you're talking about then no, you're not crazy. I think the other poster was assuming you were talking about consumer debt . 

Yes, you can find lenders that will consider the income of the property you are buying. They usually will allow 75% of the rental income of the new property to be added in when considering your loan. This is assuming that you have at least two years of rental income showing on your taxes. (this shows them you have "landlording experience", for what it's worth...) It sounds like you would have that from your duplex. If you don't yet have two years of tax returns you may be able to show rent receipts or something like that. Or, possibly, you may have to wait until you can file your 2014 taxes.

Again, not all lenders will do this. You're looking for a bank that doesn't only do  retail homebuyer loans. Just call the lending department, explain what you're trying to do , and ask. Or find a mortgage broker that works with investors- that might be quicker/easier.

the debt to income is all from the duplex I have no consumer debt and my truck is paid. I have only talked to Wells Fargo about a loan but the loan officer told me the potential rental income would never be used to qualify and that my only two options were to pay cash for any future properties or get my debt ratio lowered. I really appreciate all the great feed back that everyone is giving me!

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