Brrrr dti issue

9 Replies

Ok. Example time

I buy first house to house hack with traditional mortgage. Cool.

I buy 2nd house with hard money and refinance with a bank. My problem is when I would go to get it refinanced, my dti would be rediculous because the rent doesn't count as income for 2 years. 

I make 30k a year. Finance a 70k house. Put friends in to pay rent. Lets say 500 debt to my 2500 income which is 20% but school loans make it more like 950 (school credit cards new mortgage) debt to 2500 income is now almost 40% I can't add in anorthern 70k refinanced home because that would send me over the 43% dti. and since the rent from 2nd house doesn't count for 2 years, how does one beat the dti???

Originally posted by @Jonathan Wooten :

I buy 2nd house with hard money and refinance with a bank. My problem is when I would go to get it refinanced, my dti would be rediculous because the rent doesn't count as income for 2 years. 

That's an overlay. Make some phone calls until you find a REI friendly lender.

Related: How Overlays Kill Deals.

Chris, so I spoke with just 1 bank ( I know) will some banks look at that rent as income before the one year mark, and if it's cashflow is positive, it won't be considered a debt? 

Thanks

or are you saying I should seek a hard money lender who can go up to 2 years?

@Jonathan Wooten  Thanks for bringing up this topic. I was just pondering the same thing. As I don't have much to lend to the conversation now I am interested in hearing what others are saying. 

@Jonathan Wooten you should go talk to some banks, local smaller ones, and see what their situation is. Each will have it's own way of handling this scenerio.

You need or should do this before you close on every property just to make sure you have a viable exit strategy. 

@Jonathan Wooten , your PRIMARY is supposed to appraise at much more than you bought it for, because you bought an absolute bargain, right? So, your equity in IT should allow a HELOC, so you can finance your next buy CONVENTIONALLY from day one, with your "free" ~20% deposit.

THAT'S how Brrrr works! But, if you haven't bought enough INSTANT additional equity because your deal wasn't really a "deal", you WILL be lumbered with the vagaries of HML.

Maybe try Asset-based (Commercial?) Lenders, who MAINLY base their loan amounts on a set percentage of their own appraisal value of the subject property, rather than its and your income?

(Or so I've heard). Welcome to BP. All the best...

Maybe look into B2R finance. I believe it's an asset based lender. They lend based on the cash flow of the property, not your income.

I'm thinking about buy a rental and called a couple of credit unions. Couple said they would count the new rent as income to offset DTI. Call around

Brrrr and dti should not be used in same sentence.

Find a local credit union or small local bank and get a portfolio or commercial loan that looks at dcr not dti.

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