How to lower DTI ratio to get more financing

Question

I have two sf rentals, and my dti is around 40%. Is there something I can do to still own these properties, but not let it hurt my dti like I is?

Eric James · Answer

If PITI is less than 75% of rents, rental properties will decrease your DTI, according to Fannie Mae guidelines.

Nick K. · Answer

Bump! No answer to this question yet. Title for properties owned can be transferred to one or multiple LLCs but how can we make a dent in the DTI ratio? Is it by transferring the mortgage too? If so, how would it work? Any creative ways you recommend?

J. Martin · Answer

You either have to reduce the numerator, or increase the denominator. Depending on whether or not the debt is all mortgage debt, or other debt..

Transfer whatever debt you can to an entity, then guarantee the debt yourself if necessary. Personal credit card debt? Transfer it to another entity. Private notes? Try to re-write to company with you as guarantor.. Mortgage debt? You can try..

Or you can pay down debt. I assume you don't have the ability to increase income..

Marvin Ong · Answer

@Caleb Heimsoth Im not worried about the financing. Im curious if I form an LLC with a few other people, and purchase a property for investment. Will that effect my personal DTI if I were to buy some personal properties for myself down the line.

Marvin Ong · Answer

Currently researching the same topic. Will personal DTI be effected if investment properties are under an LLC that is also registered to the same person?

Jerry Padilla · Answer

@Matt Todd have you factored in 75 percent of the potential income for property number 3? The DTI ratio may vary slightly between lenders. Was it an investor friendly mortgage company? I wouldn't give up just yet. Try to find someone experienced with investors and see if there is something that they can come up with.

Matt Todd · Answer

If I transfer both rental mortgages to an entity like an LLC or corp.  then if I guarantee the properties in my name , then won't that still be counted towards DTI? Currently my dti is around 40%. Went thru suntrust to get another loan and they would not approve anything if your dti is higher than35%.

Matt Todd · Answer

William t , the properties are in my name only

Ed Wood · Answer

Need more information but here is a general answer. If you've reported these properties on your tax returns for the last 2 years you can use the income from the properties to qualify.  Up to Jan 10 2014 to qualify you DTI can be up to 50% , after Jan 10 max DTI will be 43%.

You will also need 6 months PITI reserves for the subject property with a DTI less than 45% and from 45% to 50% you'll need 12 months subject property PITI reserves.

How to lower DTI ratio to get more financing

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