Buying buy/hold property with no DTI room?

Question

I am currently seeking to buy my first investment property but with my own primary home loan I won't have any room under DTI restrictions to get a personal mortgage on a second property.

What are some ways to get around this? Or am I stuck with Private/Hard money as my only option?

If my only option is private or hard money I'm afraid to carry that financing for 2 years before being able to get a loan based on the rental income. Or am I wrong in that thinking?

Braden Hobbs · Answer

Thanks. Once I have a deal locked in I'll probably be reaching out to find out more about HMLs! But one thing I'm concerned with is if you can't find a bank to loan without 2 years of rental income showing, does that mean you'd be carrying hard money for 2 years if you can't change your DTI et al.

Michael Johnson · Answer

Braden,

I am in the exact same boat as you are. I am also actively trying to find a partner/work around. I spoke to the broker who put together my primary residence loan and while this may not apply to your situation it may be good info. He said that if you can show proof that you are not solely responsible for the mortgage on your primary (i.e., your spouse pays half), then some lenders will allow you to qualify by basing your DTI calculation using only half your mortgage debt.

Braden Hobbs · Answer

@Chris Hiatt

Debt-to-income - There's a percentage that you have to stay under based on all your current debt to income. Then there's front-end and back-end DTI, front end is just your mortgage debt to gross income, while back-end is everything.

Braden Hobbs · Answer

Thanks for the info. I understand ways of changing your DTI ratio to get the loan. I however have no desire to wait years until my current home or student loans etc are paid off so I can meet DTI requirements.

I was mainly curious as to ways around DTI.

So far it seems like there are a couple options for investors in this boat.

1. Find a bank that counts current rent towards your income. They exist just find them.

2. Hard/Private money

3. Increase income or decrease debt.

Thanks for the input everyone!!

Jacob Edmond · Answer

Is all of your debt yours or is some of it your spouse's?

There are two angles ultimately, increase your income, or decrease your debt, however that is the simplified version. Increasing your income is obvious, but usually the harder option.

The easier option is usually to decrease your debt, because this can be attacked by paying off debt, eliminating it by not including your spouse in the loan if they have more debt than their contributing income can counter.

Lastly, and probably the best option is to apply for a smaller mortgage, or buy a cheaper house.

We recently bought our second house while renting out our first primary residence. We didn't have 2 years on rental income yet so we had to qualify for both counting against our DTI. My wife has no income currently being a SAHM but she has half of our student loan debt, so I applied for the mortgage by myself.

Charlie Fitzgerald · Answer

HML is your best option in thus situation and with the the right HML lender, it won't be a bad thing.  I can explain more on this if you contact me.

Darren Eady · Answer

Find a private money lender / hard money lender that does not require a DTI ratio.  I can help more if you like.

Chris Hiatt · Answer

@Braden Hobbs thanks for the response. I am aware of DTI ratio but didnt know about the front and back-end differences. Learned something new today.

Chris Hiatt · Answer

What are DTI restrictions?

Buying buy/hold property with no DTI room?

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