I need lending advice

[Andrew Swaim]

Hey guys I am moving my family into a home in a place with less crime and our house will be finished in 4 months, I am trying to buy investment properties in the meantime, but the lender told me if buy a investment property in the meantime I will mess up my “debt to income ratio” and I will loose the house I plan on living in. What on earth do I do?! 

[Matthew Paul]

wait 5 months

[Devin Peterson]

Quote from @Andrew Swaim:

Hey guys I am moving my family into a home in a place with less crime and our house will be finished in 4 months, I am trying to buy investment properties in the meantime, but the lender told me if buy a investment property in the meantime I will mess up my “debt to income ratio” and I will loose the house I plan on living in. What on earth do I do?! 

Use DSCR loans to purchase your investments and put them into an LLC - then you won't be hit for the debt. Feel free to message me directly for more questions and info

[Eliott Elias]

You need to rent out your initial home. 

[Mark Ito]

Don't let a speed-bump stop your vehicle from moving forward! If you have/find deals that are worth it that can't wait until the new house is finished, get creative. Creative financing won't necessarily effect your DTI. Seller financing, lease-to-own, wraps, subject-to, private lenders, hard money (if need be) are all ways to invest without traditional financing that will come up on your record. You can Google or YouTube any of those to get more info.

[Robin Simon]

Quote from @Devin Peterson:

Quote from @Andrew Swaim:

Hey guys I am moving my family into a home in a place with less crime and our house will be finished in 4 months, I am trying to buy investment properties in the meantime, but the lender told me if buy a investment property in the meantime I will mess up my “debt to income ratio” and I will loose the house I plan on living in. What on earth do I do?! 

Use DSCR loans to purchase your investments and put them into an LLC - then you won't be hit for the debt. Feel free to message me directly for more questions and info

Yes - this is the sweet spot for what DSCR loans are made for, borrow through an LLC like @Devin Peterson advised

[Jaron Walling]

@Eliott Elias What's a "DTI"?... why do I read these forums.

[Justin Pack]

Quote from @Jaron Walling:

@Eliott Elias What's a "DTI"?... why do I read these forums.

 dti=debt to income

[Stephanie P.]

Quote from @Devin Peterson:

Quote from @Andrew Swaim:

Hey guys I am moving my family into a home in a place with less crime and our house will be finished in 4 months, I am trying to buy investment properties in the meantime, but the lender told me if buy a investment property in the meantime I will mess up my “debt to income ratio” and I will loose the house I plan on living in. What on earth do I do?! 

Use DSCR loans to purchase your investments and put them into an LLC - then you won't be hit for the debt. Feel free to message me directly for more questions and info

This is dangerous advice.

Using DSCR loans and putting them in an LLC will still impact DTI.

Here's why.

LLC's are pass through entities. They will show up on personal tax returns. The borrower will have to explain the properties on his Schedule E and if there is a mortgage on them. If the borrower is buying before the tax returns come out, the new lender won't know that portion, but MOST DSCR loans require a personal guarantee and because they have a personal guarantee, the personal guarantor is responsible for the debt and it should be disclosed (lying by omission is still lying). That new DSCR loans history or debt amount may not show up on personal credit, but it will show up in two other places, the Drive report that will be pulled by an underwriter and at the bottom of the credit report in the inquiries section. The borrower will have to explain a. why they have inquiries (shopping for a mortgage of course) and b. was there any new debt that resulted from the inquiry (the killer unless you want to commit mortgage fraud). Once the new property(s) are exposed, the owner occupied loan will be denied. There's no coming back from leaving mortgages, mortgage histories and additional financed properties off the application.

Just wait a couple of months.  It's not the end of the world.

Stephanie

[Jay Hurst]

Quote from @Robin Simon:

Quote from @Devin Peterson:

Quote from @Andrew Swaim:

Hey guys I am moving my family into a home in a place with less crime and our house will be finished in 4 months, I am trying to buy investment properties in the meantime, but the lender told me if buy a investment property in the meantime I will mess up my “debt to income ratio” and I will loose the house I plan on living in. What on earth do I do?! 

Use DSCR loans to purchase your investments and put them into an LLC - then you won't be hit for the debt. Feel free to message me directly for more questions and info

Yes - this is the sweet spot for what DSCR loans are made for, borrow through an LLC like @Devin Peterson advised

 @Robin Simon Do you require a personal guarantee on your DSCR loans to a LLC?

[Robin Simon]

Quote from @Jay Hurst:

Quote from @Robin Simon:

Quote from @Devin Peterson:

Quote from @Andrew Swaim:

Hey guys I am moving my family into a home in a place with less crime and our house will be finished in 4 months, I am trying to buy investment properties in the meantime, but the lender told me if buy a investment property in the meantime I will mess up my “debt to income ratio” and I will loose the house I plan on living in. What on earth do I do?! 

Use DSCR loans to purchase your investments and put them into an LLC - then you won't be hit for the debt. Feel free to message me directly for more questions and info

Yes - this is the sweet spot for what DSCR loans are made for, borrow through an LLC like @Devin Peterson advised

 @Robin Simon Do you require a personal guarantee on your DSCR loans to a LLC?

 Yes - we require personal guaranty for anyone who owns over 25% of the LLC with an aggregate minimum ownership by guarantors of 50%.

[Mark Munson]

Hi @Andrew Swaim

As indicated above, a DSCR loan won't show on your credit report; however, the credit pull will and, more than likely, you will have to explain where that pull came from.

[Jay Hurst]

Quote from @Robin Simon:

Quote from @Jay Hurst:

Quote from @Robin Simon:

Quote from @Devin Peterson:

Quote from @Andrew Swaim:

Hey guys I am moving my family into a home in a place with less crime and our house will be finished in 4 months, I am trying to buy investment properties in the meantime, but the lender told me if buy a investment property in the meantime I will mess up my “debt to income ratio” and I will loose the house I plan on living in. What on earth do I do?! 

Use DSCR loans to purchase your investments and put them into an LLC - then you won't be hit for the debt. Feel free to message me directly for more questions and info

Yes - this is the sweet spot for what DSCR loans are made for, borrow through an LLC like @Devin Peterson advised

 @Robin Simon Do you require a personal guarantee on your DSCR loans to a LLC?

 Yes - we require personal guaranty for anyone who owns over 25% of the LLC with an aggregate minimum ownership by guarantors of 50%.

 @Robin Simon Then the loan DOES go against his debt to income ratio. An LLC with a personal guarantee is just a loan to a person with a LLC wrapper. I am now sure why you would suggest that it would not effect his DTI. It is FRAUD to leave out a loan that you have personally guaranteed even if vesting in a LLC. Now if you said that they DSCR loan will likely not negatively effect DTI because he will likely be able to use 75% of the rent to cover the payment that would be true.

[Lyndsay Zwirlein]

Quote from @Andrew Swaim:

Hey guys I am moving my family into a home in a place with less crime and our house will be finished in 4 months, I am trying to buy investment properties in the meantime, but the lender told me if buy a investment property in the meantime I will mess up my “debt to income ratio” and I will loose the house I plan on living in. What on earth do I do?! 

I would recommend having a broker review your situation because more info is needed.  Also you will want to speak with your current lender who is helping you on the new home that is being finished soon. If you have your credit pulled for an investment home, you will want to understand if that causes issues for them.

[Reid Chauvin]

@Andrew Swaim - if you are able to get the prospective investment property leased out, and if the monthly rental income on the property is greater than the mortgage cost of the property (plus taxes, insurance, HOA fees) by a large enough margin then it will not have a negative effect on your DTI. It could even have a positive effect. An underwriter will want to see a signed lease agreement and likely proof of security deposit on the property. They will multiply the agreed upon monthly rent amount by 75% to derive the true rental income (this 75% factors in vacancies and management expenses). The true rental income less the mortgage costs referenced above is the number that will be included as part of your DTI calculation.

I would only use a DSCR loan instead of a conventional loan if you didn't have the income for a strong enough DTI ratio, which it sounds like that is not the case.

[Steven Foster Wilson]

Quote from @Andrew Swaim:

Hey guys I am moving my family into a home in a place with less crime and our house will be finished in 4 months, I am trying to buy investment properties in the meantime, but the lender told me if buy a investment property in the meantime I will mess up my “debt to income ratio” and I will loose the house I plan on living in. What on earth do I do?! 

 I would try to work with your lender and if not find someone else. I have had to change lenders mid-process before because I found someone who could do better. You never know until you ask. If it is a lease they want then start showing your place to someone to lease set up. Find out what they want and whats holding you back and try to overcome that. There is the saying " Ask and you will receive."

[Luis Somoza]

Quote from @Devin Peterson:

Quote from @Andrew Swaim:

Hey guys I am moving my family into a home in a place with less crime and our house will be finished in 4 months, I am trying to buy investment properties in the meantime, but the lender told me if buy a investment property in the meantime I will mess up my “debt to income ratio” and I will loose the house I plan on living in. What on earth do I do?! 

Use DSCR loans to purchase your investments and put them into an LLC - then you won't be hit for the debt. Feel free to message me directly for more questions and info

That's only if the loan itself is written to the LLC, and not in his name directly in any manner. Putting the property solely in a LLC but the mortgage in his name still makes it count against his DTI.

@Andrew Swaim wait till you're in your new home. Credit inquiries will show up on your credit report, and you will have to explain them. When you do that you will have to disclose that you obtained other mortgages, and prove that they are not in your name, or the loans will be counted against your DTI.

[Luis Somoza]

Quote from @Mark Munson:

Hi @Andrew Swaim

As indicated above, a DSCR loan won't show on your credit report; however, the credit pull will and, more than likely, you will have to explain where that pull came from.

A DSCR loan does show up on credit if the loan is written in his name directly.

[Mark Munson]

Quote from @Luis Somoza:

Quote from @Mark Munson:

Hi @Andrew Swaim

As indicated above, a DSCR loan won't show on your credit report; however, the credit pull will and, more than likely, you will have to explain where that pull came from.

A DSCR loan does show up on credit if the loan is written in his name directly.

That's correct, but the vast majority of DSCR loans are too companies, so fairly easy to avoid that issue.

[Jay Hurst]

Quote from @Mark Munson:

Quote from @Luis Somoza:

Quote from @Mark Munson:

Hi @Andrew Swaim

As indicated above, a DSCR loan won't show on your credit report; however, the credit pull will and, more than likely, you will have to explain where that pull came from.

A DSCR loan does show up on credit if the loan is written in his name directly.

That's correct, but the vast majority of DSCR loans are too companies, so fairly easy to avoid that issue.

If the lender reports the debt to credit bureaus or not is irrelevant. Lots of small banks and investors do not report to credit as it cost money to do so. We lend out of our balance sheet and do not report to credit. Does that mean the borrower does not have a loan? Of course not! If you have a recourse loan, then you have a loan. Period. Does not matter if it is a conventional, DSCR or any other structure. A loan is a loan.

[Luis Somoza]

Quote from @Jay Hurst:

Quote from @Mark Munson:

Quote from @Luis Somoza:

Quote from @Mark Munson:

Hi @Andrew Swaim

As indicated above, a DSCR loan won't show on your credit report; however, the credit pull will and, more than likely, you will have to explain where that pull came from.

A DSCR loan does show up on credit if the loan is written in his name directly.

That's correct, but the vast majority of DSCR loans are too companies, so fairly easy to avoid that issue.

If the lender reports the debt to credit bureaus or not is irrelevant. Lots of small banks and investors do not report to credit as it cost money to do so. We lend out of our balance sheet and do not report to credit. Does that mean the borrower does not have a loan? Of course not! If you have a recourse loan, then you have a loan. Period. Does not matter if it is a conventional, DSCR or any other structure. A loan is a loan.

My point was that if it's in the borrower's name, it's going to get counted against them.

[Jay Hurst]

Quote from @Luis Somoza:

Quote from @Jay Hurst:

Quote from @Mark Munson:

Quote from @Luis Somoza:

Quote from @Mark Munson:

Hi @Andrew Swaim

As indicated above, a DSCR loan won't show on your credit report; however, the credit pull will and, more than likely, you will have to explain where that pull came from.

A DSCR loan does show up on credit if the loan is written in his name directly.

That's correct, but the vast majority of DSCR loans are too companies, so fairly easy to avoid that issue.

If the lender reports the debt to credit bureaus or not is irrelevant. Lots of small banks and investors do not report to credit as it cost money to do so. We lend out of our balance sheet and do not report to credit. Does that mean the borrower does not have a loan? Of course not! If you have a recourse loan, then you have a loan. Period. Does not matter if it is a conventional, DSCR or any other structure. A loan is a loan.

My point was that if it's in the borrower's name, it's going to get counted against them.

 @Luis Somoza  Yes, that is correct. I was responding to the post below yours. We are saying the same thing. 

[Simon W.]

Quote from @Jay Hurst:

Quote from @Robin Simon:

Quote from @Jay Hurst:

Quote from @Robin Simon:

Quote from @Devin Peterson:

Quote from @Andrew Swaim:

Hey guys I am moving my family into a home in a place with less crime and our house will be finished in 4 months, I am trying to buy investment properties in the meantime, but the lender told me if buy a investment property in the meantime I will mess up my “debt to income ratio” and I will loose the house I plan on living in. What on earth do I do?! 

Use DSCR loans to purchase your investments and put them into an LLC - then you won't be hit for the debt. Feel free to message me directly for more questions and info

Yes - this is the sweet spot for what DSCR loans are made for, borrow through an LLC like @Devin Peterson advised

 @Robin Simon Do you require a personal guarantee on your DSCR loans to a LLC?

 Yes - we require personal guaranty for anyone who owns over 25% of the LLC with an aggregate minimum ownership by guarantors of 50%.

 @Robin Simon Then the loan DOES go against his debt to income ratio. An LLC with a personal guarantee is just a loan to a person with a LLC wrapper. I am now sure why you would suggest that it would not effect his DTI. It is FRAUD to leave out a loan that you have personally guaranteed even if vesting in a LLC. Now if you said that they DSCR loan will likely not negatively effect DTI because he will likely be able to use 75% of the rent to cover the payment that would be true.

 I am curious why this was suggested.

[Jay Hurst]

Quote from @Simon W.:

Quote from @Jay Hurst:

Quote from @Robin Simon:

Quote from @Jay Hurst:

Quote from @Robin Simon:

Quote from @Devin Peterson:

Quote from @Andrew Swaim:

Hey guys I am moving my family into a home in a place with less crime and our house will be finished in 4 months, I am trying to buy investment properties in the meantime, but the lender told me if buy a investment property in the meantime I will mess up my “debt to income ratio” and I will loose the house I plan on living in. What on earth do I do?! 

Use DSCR loans to purchase your investments and put them into an LLC - then you won't be hit for the debt. Feel free to message me directly for more questions and info

Yes - this is the sweet spot for what DSCR loans are made for, borrow through an LLC like @Devin Peterson advised

 @Robin Simon Do you require a personal guarantee on your DSCR loans to a LLC?

 Yes - we require personal guaranty for anyone who owns over 25% of the LLC with an aggregate minimum ownership by guarantors of 50%.

 @Robin Simon Then the loan DOES go against his debt to income ratio. An LLC with a personal guarantee is just a loan to a person with a LLC wrapper. I am now sure why you would suggest that it would not effect his DTI. It is FRAUD to leave out a loan that you have personally guaranteed even if vesting in a LLC. Now if you said that they DSCR loan will likely not negatively effect DTI because he will likely be able to use 75% of the rent to cover the payment that would be true.

 I am curious why this was suggested.

 @Simon W.   Comes up over and over on this board. Baffling. 

[Juan Hasbun]

Quote from @Andrew Swaim:

Hey guys I am moving my family into a home in a place with less crime and our house will be finished in 4 months, I am trying to buy investment properties in the meantime, but the lender told me if buy a investment property in the meantime I will mess up my “debt to income ratio” and I will loose the house I plan on living in. What on earth do I do?!

If the property requires taking out a mortgage, the additional debt from the mortgage payment will increase your total monthly debt obligations, which will in turn increase your DTI ratio.

Lenders use DTI ratio as a way to assess your ability to repay debt. A high DTI ratio indicates that a larger portion of your income is going towards debt repayment, and a lower DTI ratio indicates more financial stability. As a private lender, I would recommend that you keep your DTI ratio below 43% to be considered a safe borrower.

I recommend taking out a DSCR loan instead. Lenders use the DSCR as a way to measure a property's ability to generate sufficient cash flow to service its debt obligations. If a property's DSCR is less than 1, it means that the property is not generating enough income to cover its debt payments and is considered a higher risk. On the other hand, a property with a DSCR greater than 1 is considered to have a lower risk.

Good Luck!