Maxed out on mortgages, now what??

20 Replies

Hi all, I own several investment properties and am always looking for more, problem is, I am now maxed out on conventional mortgages. Where do I go from here? I would like to add more properties to the portfolio and have never had any issues or late payments on any mortgages, the issue is my debt to income ratio simply will not allow for any more loans. Having the property qualify on its own does not work, simply not enough net to qualify for much of a loan. The prices here are on the higher side (SF @ $250K, MF begin at $285K) although the income they bring in makes decent ($8,000-$14,000/yr) cash flow possible with about 25% down payment. Can anyone in similar situation previously help?

Welcome and congrats ! I'm assuming you have solid credit as well? Have you tried to maybe do a cash out refinance or a home Equity loan?

Yes, and unfortunately those loans I also do not qualify for any more money

Fannie mae allows up to 10 mortgages. So if you have less than 10, just contact a mortgage broker. If you are at 10 then you need to start looking at portfolio lenders or even business loans.

What is your DSCR on the properties? If you are at 1.25, which hopefully you are, the underwriters should view them as neutral on your debt to income ratio.

But if you are too low below the 1.25 level, then you need to move to a portfolio lender. Or even consider business loans. 

I guess I have to ask around for lenders who look at DSCR. The one I have been using only looks at the Tax return for the property (which comes out as a loss after depreciation, etc).

DSCR is way over 1.25, problem is my income still too low with all the debt already in place.

I have to agree with @Russell Brazil . You probably need to consider commercial loans and portfolio lenders. That is what I use. I have over over 30 units and only 3 are in my own name on the loans. A few other options are doing a JV (joint venture), with another person and using their credit and DTI rating to get into a property. If you have not already done so you will probably want an LLC for the JV or for holding the properties for the portfolio loans.

I'm like @Jerry W. and have over 30 with no hurdles for getting more (if I could just locate an opportunity in my market!).

With every deal, I try and offer solutions that include seller financing on my LOI, especially if it's a retiring LL. It is always one of my options in my LOI. It doesn't always happen, but well-structured owner financing will definitely keep your 'credit' clear and most sellers don't know what DTI is anyway.

Just make sure the property will support itself @David Boroughes . Not having the DTI may be a warning to chew on what you have for a while before trying another mouthful. High DTI folks didn't survive the GRC.

Portfolio lenders are probably your best bet. I had a conversation with two of them recently. Rates were decent. They considered credit score but not DTI. One offered me almost 100K more than what I am seeking.

Interesting thread and replies.  I guess it depends how/what you are buying? We have never purchased putting 25% down.  I assume this is the traditional route you have been going. We have always purchased cash using private lenders, under market value, and then we use a small local community bank to do a cash out re-fi. While they look at debt to income ratio they definitely don't look at it as closely as they do the property itself.  But if you are paying market value and plopping 25% down.. this method will not work.  Maybe time to get more creative? 

@David Boroughes , keep in mind if I could cash flow $8K per year per unit I would firmly retired ad would be doing my typing on a lap top in the Bahamas.  That being said, @Steve Vaughan has a good point of going for some owner financing options, and like @April Crossley pointed out you might look at private money. Perhaps you have a relative or two who is tired of making .25% interest on their CDs. A final way of helping your DTI is to sell the property with the most equity and doing a refinance on another one after paying the note down. DTI is all about cash flow, not equity, so getting payments lower can help.

If you want to go conventional then your gonna need to look at your tax returns and see what your writing off that could be lowering your Income. While it's great to pay less taxes it also makes it so you can borrow less.
Lenders will base your DTI off your tax returns, credit report and pay stubs. Sometimes just paying off a credit card or not writing off certain expenses on your tax return will bump up your income.

DTI is never an issue for a REI buying solid cashflow positive properties, provided that said REI is being honest with the IRS about their rental income and deductions, keeping good records, and working with an REI friendly lender.

Fannie Mae's cap of 10 financed properties, however, is pretty ubiquitous. Short of going commercial, portfolio products (typically ARMs) is the solution.

@David Boroughes ,

While you can't clone yourself, you can "clone" entities - LLCs.

One maxes out? Start another. Gives you another (max) properties/loans you can acquire before you bump your head on the ceiling again.

Now, those will be commercial loans, and your personal income will matter less. Each entities income figures into the scenario. SO, they're all separate, per entity.

My $0.02...