Trying to buy an investment property but the DTI is a problem

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Trying to buy an investment property but the DTI is a problem

Angela Rosa
Hamden, CT · Member since 2017 · 3 posts · 0 votes

I recently purchased a single family home for myself. Now I would like to purchase a two family home to rent out. I have enough money to pay up to 30% down payment as well as reserves for 4 months for each property.my credit is almost excellent but I can't get past the DTI. IT'S EXTREMELY DEPRESSING. I work alot of hours already so getting any type of meaningful seconf job is not an option. What do I do? I don't have alot of debt the biggest problem is the mortgage payment when compared to my income. Refinancing isn't an option as I just closed on my loan with an excellent interest rate. What can I do?

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Darren Budahn
Investor · Milwaukee, WI · Member since 2014 · 811 posts · 420 votes
9y
Angela Rosa Shop around for a lender who will count the income from your rental property right away. Some banks have overlays where they are only counting the debt from the new purchase against your DTI ratio and will not factor in the rental income for a specified period of time. These lenders do exist. Keep looking.
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  • Account Closed
    Property Management · Marietta, GA · Member since 2015 · 45 posts · 25 votes
    9y

    Did you calculate DTI yourself or it is per lender? Because on investment property you can calculate future rental up to certain %. So that should bring your DTI up.

    Find a good loan officer that works with investor, they should be able to help you.

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  • Angela Rosa
    OP
    Hamden, CT · Member since 2017 · 3 posts · 0 votes
    9y

    A lender calculated the dti.

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  • Darren Budahn
    Investor · Milwaukee, WI · Member since 2014 · 811 posts · 420 votes
    9y
    Angela Rosa Shop around for a lender who will count the income from your rental property right away. Some banks have overlays where they are only counting the debt from the new purchase against your DTI ratio and will not factor in the rental income for a specified period of time. These lenders do exist. Keep looking.
    1Reply
  • Jordan MoorheadBusiness Member
    Real Estate Agent · Austin, TX · Member since 2015 · 5k+ posts · 3k+ votes
    9y
    What other debt do you have?
    [email protected]512-888-9122
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  • Angela Rosa
    OP
    Hamden, CT · Member since 2017 · 3 posts · 0 votes
    9y

    A credit card with a 5000 balance. No student loans,  no car payment nothing else.

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  • Chris MasonPro Member
    Moderator
    Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
    9y

    Hi @Angela Rosa,

    @Darren Budahn is right, time for you to dial for dollars until you find a lender that doesn't have overlays killing your deal. Include your real estate network in your dialing for dollars. 

    Fannie Mae will allow that rental income to count, doing [ gross rent * 75% - SubjPropPITI ]. If that's a positive number, it'll actually improve your DTI. Keep in mind that if there's a long-term tenant paying 40% below market rents, that low number will be used for the calculation and not appraised market rents. But that's something to worry about after you find your REI-friendly no/minimal overlays local lender - from what you've described, it sounds like you're on pause until you lock that down.

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  • Richard C.
    AL · Member since 2016 · 31 posts · 12 votes
    9y

    Piggybacking on this topic, I wanted to ask about these lenders that lend you based on your rental income helping your DTI. Does the potential purchase property have to already have a tenant in place? What if you're buying an investment property with the intentions of renting it out, but its not tenant occupied yet? They can still give you a loan and calculate on the future rent as your income to combat DTI ratio?

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