Debt to credit ratio

9 Replies

Hello I’m David and this is my first post. Just heard of BP last week and really like it . My question is I started buying residential income property four years ago and I’m up to 15 doors. Hoping to retire in the next few years set the payments to pay off in five years. (Aggressive) now we have found another house that we want to buy for us to live in and sell ours. Problem my debt to income is through the roof and I can’t count my wife’s income because her credit score isn’t good enough. The home we found is everything we want and we agreed on a price that gives us $60,000 of equity at closing but I can’t get financing. Any suggestions would be appreciated

@David Wilbanks Even though your wife's credit is bad I would still think that adding her income would help. You may want to approach more lenders about this. Small community banks or credit unions are going to be more flexible in their terms. 

Are your rental loans 5 year loans or are you just paying extra principal? If you are paying extra principal that should be counted as income. Again this might depend on the bank so shop around.

Originally posted by @David Wilbanks :

All loans set up on 5 year payout 

 When you mean 5 year payout do you mean 5 year term fully amortized (aka your P&I payment is sky high when calculating cashflow analysis) ? 

Or did you mean 5 year payoff as in the loans will balloon and will be required to be paid in full after 5 years completely ?

If you meant the former, then thats why your DTI is screwed up. This is basically just a case of combining mortgage planning with tax planning. If the terms of the mortgages were refinanced into 30 year AM (amortization) the P&I (principle and interest) payments would appear much lower and hence the resulting cash flow would be much higher when they (lenders) go to calculate your cashflow for DTI or debt service coverage purposes.

This also could be an issue with how you file your tax returns for all of these 15 doors or a combination of the above.

Either way its really easy to fix. I see this all the time with investors who setup 10 or 15 year fixed mortgages thinking it was prudent from a lending POV to do so.