Financing / DTI Question

[Joy W.]

Hello,

Here is my dilemma. I'm a retiree. I've been in my home for some years, refinanced 3 yrs ago (no cash out) into a 15 yr @ 3% fixed rate with Wells Fargo. I'm interested in purchasing an investment property in the $20k-$40k range. I recently applied at my CU for a mortgage. I received a pre-qualification approval for $54K, and moved forward with a pre-approval for $40k. The underwriter denied it due to DTI ratio being too high (63%). I asked during the pre-qualification process if I needed to pay-off any debt and was told "no". I haven't tried with any other banks. I understand that most want to see 45% or less DTI, correct? I have 2 days left on the 30-day window for a hard pull on my credit report. I'm wondering if there are any lenders that will work with my current DTI ratio?

Plan B: I could rollover funds from my previous employer into Roth IRA ($5500 now) and ($5500 in Apr '16) then purchase property with cash.

OR

Plan C: A HELOC or Home Equity Loan - I have approximately $70k in equity, but my income may be a factor as I understand the interest rates are higher on these.

Thanks for reading!