Investor · Huntington Beach, CA · Member since 2015 · 105 posts · 25 votes
Dear lenders, I put too much down payment on my multi unit as a buy-and-hold. I am receiving cash flow from this and needless to count on depreciation I am totally capable of cash out refi. However, according to my lender DTI must be under 45%. Is there anything I can do to get my down payment back without selling it? Thank you.
Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
10y
@Miho Y. - Check with a different lender. The calculation you are referring to is probably the very calculation most commonly done incorrectly. Fannie Mae alone has four different ways of calculating rental income, it's not clear from your post that 75% of rent is the correct one.
Typically when you buy good investment properties, your calculated DTI will go down, not up.... if everyone is doing their math right. I question how a lender could have approved the purchase if it would really have resulted in a DTI of 70%!
Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
10y
@Miho Y., my guess is that the only reason you "put too much down payment" is because you were FORCED to by your Lender (and/or, because of your own calculations on how large a mortgage could still pay for itself). So unless either the property has increased in appraisal value, or its income has significantly increased, you have the same dilemma that every refi-wannabe faces.
Investor · Huntington Beach, CA · Member since 2015 · 105 posts · 25 votes
10y
It has a little but positive cash flow as is and it's appreciated 80k+ since purchase. Even if I take out max I still have positive cash flow but if they slash the rental income to 75% to count as an income then it makes my dti to 70%. My question is if that is the Fannie Mae guideline, there is no conventional available?
Lender · Baltimore, MD · Member since 2008 · 51 posts · 5 votes
10y
@Miho Y. If your lender analyzed the income properly, it sounds like conventional is not be an option at 70% DTI. The max is typically 45% for conventional.
You may need to work with a portfolio lender that can lend based on the asset and not your DTI.
What was the purchase price, how much do you owe, and when was the property acquired?
I am so paranoid and afraid of disclosing too much info here.
That is of course your right, but I am not convinced that your DTI is being calculated correctly. Does the person claiming your DTI is 70% work with a lot of investors? Real estate investor calculation of DTI is one of the most commonly incorrectly done calculations in mortgage lending.
Our formal training to get our license covers none of it, furthermore mortgage software is notoriously buggy when it comes to real estate investor calculation of DTI, and honestly it's possible to go an entire career as a loan officer without learning to do it right.
It is 100% possible that your "70% DTI" is purely the product of a software bug or someone doing the calculation incorrectly.
Lender · Baltimore, MD · Member since 2008 · 51 posts · 5 votes
10y
@Miho Y. I agree with @Chris Mason that many loan officers do not know how to calculate DTI correctly for investment properties. You may want to check with another loan officer that is experienced in computing rental income for investment properties.
Portfolio loans will carry a higher rate than conventional (7% - 9%), but sometimes it's the only option. Generally these loans are based on your credit scores and the asset, but not income.
Investor · Huntington Beach, CA · Member since 2015 · 105 posts · 25 votes
10y
Thank you. I have good credit which I would like to take advantage of to do the cheap home mortgage rate. If I have to go for 7-9%, that's whole different scenario.