Debt to Income Ratio Maxed Out!

4 Replies

My business has approximately 6 loans through our local small bank and they continuously talk about how they are investor friendly. However, they keep mentioning to us that our debt to income ratio is nearing their "1.2 limit". It sounds like once it goes below this 1.2 limit, they will not lend to us anymore even though they are keeping these loans as portfolio loans in house.

My question is....Is this bank really investor friendly? I believe the 1.2 rule they use is their bank rule. I know all banks will want personal financials before lending but are there better banks we could be using that strictly look at the cash flow and past performance of our rental properties?

Thanks in advance for the feedback!

Dan

Dan,

Your banker is likely referring to global debt service ratio as nearing 1.2. Most local community banks look at your individual debts, as well as, the cash flow of the property when qualifying you.  They are simply following regulations.  Yes, there are lending institutions that only look at the cash flow of the property. Please give me a call to discuss other options available to you.

If your DCR is 1.2 and lenders won't lend, it's probably for your own good. Find some better deals that produce better returns, raise that DCR and I bet your lender will be back.
Originally posted by @Daniel Gibson :

My business has approximately 6 loans through our local small bank and they continuously talk about how they are investor friendly. However, they keep mentioning to us that our debt to income ratio is nearing their "1.2 limit". It sounds like once it goes below this 1.2 limit, they will not lend to us anymore even though they are keeping these loans as portfolio loans in house.

My question is....Is this bank really investor friendly? I believe the 1.2 rule they use is their bank rule. I know all banks will want personal financials before lending but are there better banks we could be using that strictly look at the cash flow and past performance of our rental properties?

Thanks in advance for the feedback!

Dan

 1.20 and 1.25 Debt coverage ratio is income to expenses which means you need to find deals with more meat on the bone relative to costs. If that's what you mean by "1.2."

I think they mean a total debt extended amount of 1.2M most likely if its a residential lender since smaller local banks have certain amounts they can lend to an individual depending on the amount of assets they have on their sheets they have to maintain certain amount of reserves/deposits for the amount of debt extended to maintain their risk with federal banking regulators.

So I take it this is a smaller community or regional bank ?

Thanks for the responses!

Bob- are you a long term lender for rental properties?

Bryan- thanks for the feedback but they are talking about our personal income from our tax returns not the deal specifically.

Albert- yes it is a smaller local bank.

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