Real Estate Agent · Uniontown, OH · Member since 2019 · 29 posts · 14 votes
I was recently told that I don't qualify for a conventional loan because of my debt to income ratio due to college loans. I don't have an astronomical amount of debt and no other debt besides my wife's car payment and our her college loans. I can get the money for the down payment of 20%, but I'm struggling on how to get the rest of the money when I am being denied for a loan. I know there are other more creative solutions, but I'm having a mental block and want to get things moving. Suggestions would be greatly appreciated, thanks!
I was recently told that I don't qualify for a conventional loan because of my debt to income ratio due to college loans. I don't have an astronomical amount of debt and no other debt besides my wife's car payment and our her college loans. I can get the money for the down payment of 20%, but I'm struggling on how to get the rest of the money when I am being denied for a loan. I know there are other more creative solutions, but I'm having a mental block and want to get things moving. Suggestions would be greatly appreciated, thanks!
Nothing wrong with getting a second opinion as mentioned above.
Fannie Mae and Freddie Mac guidelines have both recently changed (in way that benefits the borrower) when it comes to student loans on income based repayment plans, deferred payments, forgivable loans, etc. I don't have your credit report or any paperwork in front of me, but someone more up to speed with all that paperwork might be able to make it work. One of the guys in my office is currently working through one where the two docs have $900,000 in student loan debt between them.... my colleague was NOT the first person that couple called, more like 3rd or 5th.
Harper Woods, MI · Member since 2017 · 384 posts · 311 votes
7y
@Aaron Port I was in the same box but I went to different lenders which showed different, maybe try local credit unions or smaller banks. you can try a hard money lender depending on how much time you need with the property. Or see if the seller is willing to do seller financing. It never hurts to ask questions the worst thing thats going to happen is you hear NO. This is what investing is all about finding a creative solution to get the deal we want.
Real Estate Agent · Uniontown, OH · Member since 2019 · 29 posts · 14 votes
7y
@Chris Mason Thanks for the response! My credit score is 650 or above, so that's good as far as I know, but I'll definitely reach out to other lenders and see what my options are. Thanks again for your comment.
Real Estate Agent · Uniontown, OH · Member since 2019 · 29 posts · 14 votes
7y
@Keyonte Summers Thanks for the comment. It's absolutely what being an investor is all about! Not sure I want to go with a hard money lender on my first one, but not ruling out the option if I expend others. I'm going to contact some smaller banks and credit unions in the area and open an account with them if I need to to help persuade them. Definitely not afraid of no, but it's good to hear of someone who was in the same boat and made it happen. Thanks!
You have two student loans between you and your wife and a car loan. Once you factor in your rent and other living expenses, how much of your net income is left at the end of the month?
Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
7y
@Aaron Port what's your current DTI? I'm guessing you have a lot more debt then you realize and a 650 credit score isn't that great. You want 760 or above
Rental Property Investor · Park City, UT · Member since 2019 · 84 posts · 149 votes
7y
How much student loan debt do you have, and at what interest rate? It's possibly a better investment (with far less risk and headache than RE) to pay that down/off first, then the DTI issue resolves itself.
Real Estate Agent · Oklahoma City, OK · Member since 2019 · 956 posts · 600 votes
7y
@Aaron Port I really like Aaron Chapman with SNMC. I've seen tons of buyers work with him and he's got competitive rates, actually meets timelines and is flexible and creative. I'm happy to make an introduction!
Real Estate Agent · Uniontown, OH · Member since 2019 · 29 posts · 14 votes
7y
@Theresa Harris@Caleb Heimsoth DTI is currently just under 50% which I realize isn't good. Working on paying down the student loans and the car payment. If it weren't for where we live and the rent being 850, our DTI would be under 40. Thanks for the input though and for getting me to think about these things!
@Theresa Harris@Caleb Heimsoth DTI is currently just under 50% which I realize isn't good. Working on paying down the student loans and the car payment. If it weren't for where we live and the rent being 850, our DTI would be under 40. Thanks for the input though and for getting me to think about these things!
I am 99 percent sure you got denied due to DTI. Banks like DTI less then 33 percent usually and you're way above that. To be frank, without earning more it's unlikely you can borrow much more.
Detroit, MI · Member since 2017 · 3 posts · 4 votes
7y
@Aaron Port
Hey man,
Get your credit up to 680
At 650, you're pretty much bound to FHA loans which require us to use 1% of the outstanding balance as a qualifying monthly payment. High down payment conventional is really the only way to offset the credit score.
Conventional permits for us to use the payment reporting, or .5% of the outstanding balance.
Being at 650 puts you in the second lowest credit bracket. Every 20 points matters starting at 620. In my years, I rarely see conventional fly at sub 680.. if you're in need of getting to 45-50% DTI, then 700, or showing strength in a bit larger of a down payment can help.
credit is the easiest fix here.
Plus a lot of lenders have overlay guidelines above Fannie and Freddie requirements for qualifying- esp on student loans!
I’d be happy to help if you’re looking for a second opinion.
Property Manager · Portland, OR · Member since 2015 · 23 posts · 10 votes
7y
@Aaron Port if you haven't done it yet put your loans on a income-based repayment. I promise I have more debt than you, but because it's income based I was approved because the bank looks at what the dti is per month. I have been paying off with debt snowball as well, but that also allows me to pay much more directly to a specific loan than all equal amounts.
@Aaron Port Figure out how to get your debt down and income up. If you do that and still want to get into real estate, why not look at buying a place where you can live and rent part of the space/house or a duplex where you live in half and rent half?
Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
7y
Qualify on your own.
If you're going to be a serious investor (some aren't and that's ok) you'll want to qualify separately anyway to not hit loan limits so soon.
Sounds like the car payment is also an issue. C'mon. Debt on depreciating metal has no place in wealth building. Sell the car if it helps. Buy the nice car after acquiring the wealth building assets, not before.
Rock Hill, SC · Member since 2015 · 104 posts · 209 votes
7y
@Aaron Port if I were you, I would pay off the debt first and then invest. Car loan should be easy to get rid of. Sell the car and buy one with cash. Then it will be easier to knock out the student loans. That’s what I would do but your mileage might vary.