Getting financing with a DIR (debt income ratio) of 60%?

Question

Any suggestion for investment lenders that have no DTI?

Or any other ways to go about this?

My DTI is 60% due to a personal home mortgage but I have $65,000 in savings I want to use on an investment property. Anyone been stuck in a similar situation?

Eric Johnson · Answer

@Kenneth Garrett Hey Kenneth, I have some good experience working with banks and credit unions, all which calculate global borrower financials on these deals, which means they're still out of reach for many investors. If you go commercial route, they don't offer the NON-trid rental loans like the direct shops. If you go commercial through a credit union they usually like to see multifamily or other commercial assets classes with a $250,000 minimum and up (depends on the shop).

That's why even going to banks for multifamily deals is still a predicament because they still calculate global borrower financials, whereas the direct shops will look at the docs to make sure nothing shady is going on, but will not calculate global borrower financials. They calculate the asset only. It varies widely and this is something investors need to be aware of because it's not as simple as it seems.

Eric Johnson · Answer

@Yechiel Mor I can probably help you out, but it depends on the situation. I do loans without using DTI, however they have to be non owner occupied rentals in order for this to work. The loan is qualified based on the debt service coverage ratio of the income the asset produces (relative to its expenses and annualized NOI).

Shoot me a DM or a text message and I can try and help you out the best I can. Hope this helps! It's definitely a common situation for many investors.

Kenneth Garrett · Answer

@Eric Johnson

I find the commercial loans are very easy and do not require a minimum amount as you have stated.  I have used commercial loans for multifamily, two unit and single family homes.  Easy process.  Mortgages less than 100K. No problem. Although most are over 100K.

Michael Ohara · Answer

The lenders I work with base the loan on the asset rather than your DTI, just like what @Eric Johnson said above. One hurdle you may encounter is your experience. If you haven't done a deal yet it may be hard to get a loan. If that's the case you could bring in an experienced investor. All the best.

Eric Johnson · Answer

@Kenneth Garrett yes 75k is the industry standard minimum, most shops prefer 100k+ for sure

Kenneth Garrett · Answer

@Eric Johnson

I only said under 100K.  Between 85K-100K.  I did not say under 50K.  Thanks for responding.

Eric Johnson · Answer

@Kenneth Garrett curious to know who’s doing sub 50k rental loans ...

Kenneth Garrett · Answer

@Michael Tully

You can use a commercial mortgage.  The loan is based on the performance of the property. Must own the property in an entity, DSCR 1.25 or better.  Property should have a tenant in the property with a written lease.  No DTI, no seasoning, no asking about every penny you put in your account and where it came from, etc.  Higher interest rate, they will still run a credit check, fill out a financial statement, 2-3 years of tax returns, operating agreement if LLC, provide Articles of organization, etc. If S-Corp similar docs.  Use small local banks and credit unions for the best terms.

Michael Tully · Answer

Hello!I think it mostly depends on what type of properties you're looking for. Turnkey might be harder if you're just looking for a straight conventional loan, and flips may be easier if you're willing to use HML. I am new to this myself, but just throwing some ideas out there:

1) One option would be to partner with someone. If your partner has the financing and you have the down payment, together you can invest!

2) Try out the BRRRR strategy? Find a private or hard money lender to aquire, then refinance out of that loan once you have a renter in the place and can prove cash flow to a lender (the cash flow can be used to boost your income and therefore reduce your DTI)

3) If you have equity in your personal home mortgage, get a HELOC and that, combined with your $65k savings, may be enough to do cash purchases in the market you're looking to invest in.

4) Try speaking to a local community bank. They may be willing to work with your DTI depending on what type of investments you're trying to make.

Just some of my thoughts. I am a newbie, despite having been a lurker here for 3 years!

Michael Tully

Getting financing with a DIR (debt income ratio) of 60%?

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