Cash flow to offset DTI hit?

3 Replies

Is it possible to keep purchasing rentals where the property's cash flow offsets any impact that the new loan will have on your DTI? Or will my DTI always have a chunk of it taken off with each new loan on a rental?

@Ryan Moore if you are working with an investor friendly lender your rent should ALWAYS offset the new lien.  They should be counting rental income IMMEDIATELY.  If they don't, then you need a new lender.  Here's some other questions to ask in case this helps in any way:

Questions for Lenders

  1. When do you start using rental income to help me qualify? (the answer needs to be immediately)
  2. How long do you need me to be on title to refinance? (this is important if you do need a short term loan to purchase then refinance out - and the answer should be 1 day...very important that it is 1 day on title is all that is needed to refinance)
  3. What is my minimum down payment required? (not so important but if they only require 15% down on a single family home that is usually a good sign that you are working with a flexible lender)
  4. Can I change title to my LLC?
  5. Do you sell your mortgages?
  6. What is your loan minimum?
  7. Can you explain to me what your reserve requirements are?

@Ryan Moore Speaking purely from a conforming loan perspective, it is definitely doable. Most investment purchase appraisals include a rent schedule. This is a fair market analysis of what the going rent will be for the property. To be conservative, if you take this gross rent number and reduce it by 25%, as long as whatever is left over covers your PITI(A and PMI if applicable) payments, then the hit to your DTI would be zero.

Originally posted by @Ryan Moore :

Is it possible to keep purchasing rentals where the property's cash flow offsets any impact that the new loan will have on your DTI? Or will my DTI always have a chunk of it taken off with each new loan on a rental?

I don't have a single client with >3 Bay Area mortgages that has the day-job income to support those 3 Bay Area loan amounts (we're talking $1m to $5m in debt here, easily), so yes it's certainly possible. In fact, if the math is done right and it's cashflowing real estate you are buying, your DTI should improve with each acquisition.