Feeling Stuck - investing DTI affecting personal home purchase - lender input welcome

[Scott Falvey]

I've been doing the "research and analysis" for months now. We currently have two properties. My wife claims one as a primary residence and I claim one as a primary residence and also house hack it so it is also an investment. I was getting ready to take out a HELOC on the "investment" property, alI I needed to do was sign on the dotted line. The bank that offered the HELOC came in with the HELOC at one number, the appraisal came in higher than what we had originally thought it might, so I asked if the HELOC could be increased. The bank said the HELOC amount being offered put me at the top of my DTI even though the appraisal would have given more.

That statement concerned me because we want to purchase another personal home in about a year and because of that statement, I withdrew my HELOC application.

How do I go about investing in properties and keep my DTI down where it has minimal affect on a personal purchase in the future?

My general strategy is to buy and hold, mostly LTR but will probably consider MTR too. Should I make my investment purchases in an LLC and use DSCR loans when owner financing isn't an option.

So, in general, I'm bumping up against my DTI based on my w-2 income. That puts a damper on what we can borrow in the near future for a personal home. How do I keep investing with minimal or no impact to my personal DTI? Let me know if more information is needed.

Thank you

[Daniel Christopher]

Quote from @Theresa Harris:

Unless you and your wife don't live together, I'm not sure how you claim both as your primary residence.  You can buy a house as your primary, live in it for a year or two and then turn it into a rental, so it really doesn't matter from that perspective.  It will for tax purposes and what you can and can't claim on your rental (at least it does in Canada because we can't claim interest from our mortgage on our taxes for your residence).

Your DTI will cap how much you can borrow. Even if your house is worth more, the bank will only lend you $X based on how much you can page...which is based on your income.

There is seller financing, commercial loans and other options.

I think it's great you noticed this ahead of time. All paths eventually lead to DSCR loans as you begin to scale due to DTI restrictions. Even highly paid individuals such doctors/lawyers/etc eventually hit their DTI ceiling as they scale.

I have clients that still can qualify for conventional financing with their W2 but go the DSCR route to protect their DTI for financing items in their personal lives such as true second vacation homes, cars, boats, primary home, etc. and also to avoid the underwriting hassle that comes with the stringent process of conventional financing. They'd rather take a slightly higher rate, vest in an LLC (protect their personal assets and other investments due to liability associated with rental properties) , and avoid the headache as DSCR loans require lite documentation.