Avoiding the DTI ratio

[Alexander Ball]

I am about to start looking at some homes that I have scouted with a Realtor. My plan is to buy, hold, and rent the homes that I buy, but I am having a little bit of financing problems.

Mainly, I have no income. I am sick of working to make other people rich, and I want to make myself rich! So, I am going to be taking a lot of classes this semester and I want to make managing and investing and properties my income. I would love to graduate in two years with two houses well on their ways to be paid off.

However, I am having a big problem overcoming this DTI ratio. I have a large amount of capital, and not bad credit, but I can't prove my income is high enough to take on the debt. This is frustrating because 1) I am only looking at properties with a positive cash flow and 2) I have enough in my checking account to take care of these mortgage payments in case something happens for a couple months.

What can I do? My dad could co-sign with me, but he wont because he doesn't want his assets in danger. Could I create an LLC that my father could cosign to take care of my DTI problems, and still make him save from reprise?

Any help here would be much appreciated. Thank you again to the biggerpockets community.

[Michael Shadow]

If you work with a local bank and they know the values of houses in the area and you negotiate a great price (< 60% FMV) and they know that you are going to turn it into a rental and they see that you have 6-8 ,months of carrying cost saved in an account they should lend you the money.

Shop around at your local banks, not the Ameriservs and bank of americas, and stay away from brokers. Speak with whomever is in charge of lending (usually a VP).

Go meet your banker in your finest clothing (you're a business man, dress like one) and put together all your financial statements. Take in your last two years tax returns. Download a residential loan app off the web and pre fill it out and take it with you. Write up a cover letter explaining why you are visiting that banker and detail out your business plan for your rentals.

If you have a property picked out take photos of it, get the tax docs from the courthouse and draw up your income/expense estimates for the first year and show how you will make it work.

Place COPIES of all of these papers in a 1/2" three ring binder that you can give to your banker and leave it with him.

If you have a good well thought out plan and good credit you should be well on your way to getting pre-approved for your investment property.