Hit a wall with high DTI

[Lucy Smi]

My husband and I have three mortgages together (for primary residence and duplex rentals) and we are at the DTI max, thus limiting our ability to acquire new properties. We cannot re-fi since neither of us qualifies alone. What are some creative ways of overcoming the DTI problem? I heard about syndication or hard money lending (sound intimidating), but don't know much about them.

[Michael Tully]

Also, double check how your lenders are calculating your DTI. Here's a post by another BP user on this subject (Your lender may have different requirements and YMMV but still good to check how they do their math):

Originally posted by @Chris Mason:

Hi @Christian Allen,

Someone is showing you bad math. :) Rental income calculations are done wrong by the majority of lenders you speak with. None of our training or formal licensing education covers it. The math you show is for owner occupants of 2-4 unit properties, not for pure investment properties.

Rent * 75% - PITI.

If that yields a positive number, PITI has already been counted (when we subtracted) and you add that (the resulting positive number) as mortgage qualifying income.

If that yields a negative number, PITI not covered (eg, the negative number) is added as a monthly liability.

So let's say you make $3000/mo and have a primary residence PITI of $1000. DTI is $1000/$3000 = 33%.

And you find a property that the PITI will be $1400, and it rents for $2000.

$2000 * 75% - $1400 = $100.

$1000 / $3100 = 32%.

As you can see, if you are working with a competent local REI-friendly lender that is doing the arithmetic properly, your DTI should be improving with each cashflow positive property you acquire.