I'm already maxed out what do I do?

Question

Hi.

I've told from my lender that I already maxed out and won't be able to buy more property unless report more income for 2020.

Question; is there any other way besides of reporting more income,to get approved for another rental property?

Any advice would be appreciated.

Greg Scott · Answer

If you are buying your rent properties correctly (strong cash flow) the income from the property should be sufficient to qualify for the purchase.  In other words, each property you buy should make it easier to qualify for the next one.

I suspect you are talking to a lender that typically handles loans for owner-occupants and does not know how to handle income-producing properties.   Talk to one that works with investors.

Fred Shatzoff · Answer

@Alex Moazeni  When you say you are maxed out do you mean you have 10 Fannie Mae loans? If so the alternative is get a non qm loan.  These are strictly to LLC's, no doc, no limit on how many properties you can own, 30 year fixed are available with no balloon.

Stephanie Medellin · Answer

@Alex Moazeni  It's really hard to say without looking at your paperwork.  If they are counting rental income from your tax returns, maybe you have too many write offs on your schedule E.  Even if the rent covers the mortgage, often people write off other expenses and the rentals actually become a liability for lending purposes.  Did you recently add any monthly payments / debt?  Buy a new car?  Higher balances on your revolving accounts?  All of those things can impact the debt to income ratio too.  Maybe there's something you could pay off to lower the DTI.  Other things that can help: buy down the interest rate, lower your loan amount, increase the loan term (if it's lower than 30 years).

Timothy Hero · Answer

Commercial lenders -- they don't report the mortgages on your credit and don't look at income, dti, employment, or taxes.

Or you can refinance your existing properties onto commercial notes and have them removed from your credit to free up space.

Andrew Postell · Answer

@Alex Moazeni thanks for posting!  Always great to hear from a fellow Texan.  Bigger Pockets does have some good state specific forums and Texas is their most active forum.  Feel free to post there if you ever need some more "local" advice about things.

As suggested above, it sounds like you need a different lender.  You are never MAXED out when investing in income producing properties.  Based on what you mentioned, I can't tell WHY you are maxed out but 99.9% of the time you will be able to find lending elsewhere.  Continue to search and feel free to ask anything additional.  Thanks!

Dan Travieso · Answer

You definitely want to speak with another lender, specifically a small community bank or credit union. Approval criteria can vary wildly from small bank to to bank so speak to several and you will eventually find one willing to lend.

Andrew Kougl · Answer

The lender is referring to your "Debt to Income" ratio. It's a common challenge real estate investors come across. It means personally, there is too much debt the lender views you as liable for compared to the income history you've shown.

I've heard some lenders do not acknowledge rental income as benefiting/contributing to your personal income at all. Still other lenders will only give you 75% to 70% of the income to be recognized as personal income.

Are your properties cash flowing? Is your income statement showing a positive return each month? If so, keep talking to lenders until you find one willing to work with you.

Andrew Kougl · Answer

@Alex Moazeni

You do for this particular lender. And you may need to for others as well. Research DTI calculators online to figure out what your ratio is.

David A Lisowski · Answer

In terms of DTI, each rental property income should be offsetting the new debt. So in theory, your income should be increasing faster than your debt with each investment purchase.

Unless your properties are losing money or you have a bunch of other liabilities on your credit report, it shouldn't be an issue. You may need a tax filing to have verified income.

Unless you meant the FMNA/FHLMC limit of 10 financed properties...?

Ask this lender for the rental calculations they are using for the rental properties. Compare to what you have.

I'd recommend a DSCR loan. Might be higher interest rate, but doesn't qualify you on DTI.

Jon Kelly · Answer

@Alex Moazeni reach out to other lenders, particularly small local/regional lenders that specialize in real estate.

Ask specifically why you are limited from additional loans.

Ask for commercial loans instead of residential

I'm already maxed out what do I do?

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