Will eliminating old escrow help Debt to Income Ratio?

Question

I was wondering if I had eliminated escrows on my current mortgages will make any difference when applying for a new loan?

If my payment is now officially $150 less a month because I paid insurance and taxes directly, will a new lander notice and just add that back to my debt payments?

Just trying to maximize my loan amount with conventional mortgages

Brendon Foster · Answer

Even if you pay them Directly the lender will still factor them into DTI. your payment doesn't become $150 less it just becomes $150 a month less that your current servicer is letting you take care of directly instead of your one lump sum payment to your servicer.

Debra A. · Answer

If you want to get really, and I mean really technical, yes. The reason why i say yes, is because if you do escrow your taxes and insurance when you go to purchase or refinance, you will be required to have some reserves and/or cushion in the escrow account which are typically financed into the mortgage so the borrower does not have to pay out of pocket. So this could add money to your balance. A higher balance of course would mean a higher payment on the mortgage. If you choose not to, yes it has to still be calculated as part of your housing expense ratio either way just like home owners association dues or common fee's. They aren't included in a mortgage payment but they are part of your total housing expense.

Jared Bouzek · Answer

@Giora Sela If you're looking at a single loan on multiple properties this will fall under the commercial realm of lending because you can't do that with a standard residential mortgage. The answers above mostly apply to residential mortgages but the standards will vary with commercial mortgages where they may not be as concerned with your DTI. Your local credit union may not be your best option for real estate investing. If I were in your shoes, I would research local lenders here on Bigger Pockets or connect with fellow local investors who have experience working with somebody in your area who can do blanket loans. If your ultimate concern is DTI, you may find that you don't have anything to worry about and could use residential financing where you're likely to receive your best financing rates & terms.@Eric C. I am in Colorado if you have any questions specific to our state.

Giora Sela · Answer

I had a feeling the ansowas no but just wanted to make sure I didn’t miss something.

My goal is to purchase several properties under a single loan but have limited options with the local credit union in my area.

Eric C. · Answer

Andrew, do you lend in Colorado?

Andrew Postell · Answer

@Giora Sela just to confirm, your taxes and insurance are counted whether they are escrowed or not. Did a lender tell you that you had a DTI problem?  Tag me back and maybe we can work through it some.

Will eliminating old escrow help Debt to Income Ratio?

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