Cash Out Refinancing + Debt to Income for next property

[Eric Wiinanen]

Need a little advice from some seasoned investors.

We are in the process of refinancing our primary residence and should have about $70k to use towards purchasing another single family house to rent out - using it as the 20% down payment.

In our current refinancing, we are pushing our maximum for DTI ratio.

With purchasing the next house, will an underwriter use the potential rent income as Income?  What is the process to do that since there wouldn't be any current lease, past rent history, etc.?  How would you approach this?

Thanks!!

[Andrew Postell]

@Eric Wiinanen I will give you the answer here but keep in mind I won't be your lender....so you'll really need to speak to your lender on this. I am saying it like this because some lenders WON'T use rental income to help you qualify. And it also depends on what loan type you are using, if you are purchasing vs. refinancing (with the BRRRR method for example), etc. So we really need to make this a part of our questions that we ask our lenders. So make sure you are asking the following questions to any potential lender that you work with:

Questions for Lenders

1. When do you start using rental income to help me qualify? (the answer needs to be immediately)
2. When do you start using “After Repair Value” on my property? (also needs to be immediately)
3. 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)
4. What is my minimum down payment required? (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)
5. How many loans can I have with you?
6. Can I change title to my LLC?
7. Do you sell your mortgages?
8. What is your loan minimum?
9. Can you explain to me what your reserve requirements are?

Feel free to ask anything additional that you might need. Thanks!