How to be approved for higher valued properties?

Question

I've bought 2 properties, but would want to consider a more expensive (higher quality) 3rd property. How can I get approved for a higher loan amount to make this a reality? I have enough for the downpayment and a buffer, but if I can't get pre-approved it doesn't matter. I hear about people buying much more expensive properties on the podcast.  Thank you.

Eric Veronica · Answer

@Danny Ondik the answer from @Andrew Postell is correct.  Before settling on a riskier or higher cost financing option you should try conventional.   It is important to hold the lender accountable. Make sure they will use subject rental income to offset the payment. Often times the proposed rental income can offset the entire proposed PITI payment.

For whatever reason many lenders will not count proposed rent and that can have a huge swing on your debt to income ratios.  Last month an investor purchasing a 4 unit approached me after being declined by another lender. He was pretty sure we couldn’t help him because the previous lender calculated his debt to income ratio at 62%. Once we added the proposed rent to offset the new PITI his ratio dropped all the way to 38%.

Andrew Postell · Answer

@Danny Ondik the crux here is working with a lender that uses your rental income immediately to qualify for a loan.  In theory, every time you purchase a rental property...you should look BETTER to a lender.  That is, as long as they are using your rental income to help you qualify.  Now, admittedly a $1,000,000 home won't cash flow as well as a $100,000 home....but I'm not sure of your property value or rent income anyway....so really we should be asking the lender "Do you use rental income to help me qualify".  If the answer is yes, then that's what we need.  If the answer is "no" then we need to go to another lender.  I hope that makes sense how I am describing this but feel free to tag me with any other questions.  Thanks!

Saravanan Saravanan · Answer

@Danny Ondik

There could be local private lenders or hard money lenders; who can lend you if you have 15% or 20% as down payment; based on their requirements.  Once you have that in place; then you get the property with inspection.  Show the property to the lender for approval.  Then you can get it funded through title company. Usually, they dont look for Debt-Income Ratio and/or credit report.

If you are approaching bank or credit union; they require DTI ratio; credit score.

Bob Okenwa · Answer

1. Earn more money.

2. Lower your DTI.

3. Find a co-borrower.

4. Find a partner.

How to be approved for higher valued properties?

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