I Guess I'm Sketchy?

10 Replies

Good Day BP.

I have been trying to buy my first duplex for about a year now. my plans are to house hack it for 2 years or so then move on to a new one and then rent them both, But one thing is holding me back.BANKS! Some general info about me is my credit score is above 700, the only debts I have against me are my car and one credit card. here is any approximant look of my finances.

Income - $1,700/month

Debts - $309/month

Net - $1,391/month

I feel that I would be able to easily purchase a nice duplex in my area for about $75,000-$100,000 or $750/month in a mortgage. I have asked my local banks multiple times why they have turned me down, but non of them can give me a straight answer.

So I'm turned to you guys here at BP for advice. What can I do to assure banks that I am not a huge risk? If any of you have any tips or tricks to help me out I would really appreciate it.

Thank You. 

Bank have a ratio of your income that can go to payments of debt and to mortgage payment.  I believe it is between 35-45%.  

$1,700 * 45% = $765 - $390 = $375 as a PITI payment.

Very likely that is under the minimum most loans banks will do.  

Maybe you can try to increase your income and/or pay off the debt.

I am surprised they are not telling you why they are not approving you. 

It could be the Small size of loan amount.  My guess is the debt to income ratio. A $750 mortgage is a lot for a $1700 income.

At $20,000 / year, some small banks/CUs may even be classifying you as low income and reduce their DTI allowance. Like @Steve L. said, you're well over the standard DTI threshold with another $750/mo debt.

The Consumer Finance Protection Bureau explains DTI here. This keeps banks pretty strict on DTI requirements.

Maybe a non-conventional loan may make more sense for you? 

I'd focus on making more money. Why are you only bringing in $20k per year? Is it time to invest in education that will move you to a more lucrative line of business. Once you make more then you can save more then you can invest more. 

Hi Baylus, Banks like to see reserve money in your savings acct. 401(K) or in your brokerage firm over and above the $ required for the down payment - in order to brace yourself when the times of vacancy occur....capex $ actually has to be put into full affect etc......and of course the never-ending debt-income ratio....

It might help to find a bank that is willing to factor in the rental income for the other half of the duplex under their DTI calculation. This might be enough to push you over the 45% debt to mortgage payment. Every bank has their own underwriting standards. Keep searching!

Originally posted by @Frank Jiang :

It might help to find a bank that is willing to factor in the rental income for the other half of the duplex under their DTI calculation. This might be enough to push you over the 45% debt to mortgage payment. Every bank has their own underwriting standards. Keep searching!

 good to know, thank you for the tip.