Securing Credit for New Properties

[Chris Rhodes]

Hello All,

I'm a newb here so please take it easy on me. I'll give you a little background and get to my point.

First of all, I live in WV, probably the most conservative bank lending state in the country, a good reason why our housing market never seems to swing either direction. I am trying to figure out how to get myself to look better to local lenders when a deal becomes available. I am not sure if I need to set up a company to do this or if anybody has some better ideas.

My credit score used to be around 720+, I say used to be because I purchased a few properties and now the lenders say my debt to income is way to high. Now my credit score has dropped to the 640 range.

I own a very nice townhouse that I used to live in. I purchased the property for $73,000 and put another $5000 out of pocket into it upgrading flooring, appiances, bathrooms and so forth. I did all the labor myself so I saved quite a bit of money. The property appraised for $89,000 when I was finished. It is a 3 bed 2.5 bath townhome. I ended up borrowing $14,000 on a HELOC to purchase a 3 bed 1 bath home. $14,000 was the purchase price. I put another $2000 out of pocket into this home, once again doing the labor myself, and now get $500 month in rent.

The wife and I had another child so we needed a 4th bedroom. We are now renting the townhouse for $700 month. We purchased a lot, thinking we would build a new house, for $26,000. We decided to wait on building a house and found a steal on a 4 bed 2 bath house for $99,000.

Having said that, if you follow so far, here is what we have:

3 bed 2.5 bath townhouse: Currently Owe $65,000, 12 years remain on loan, plus HELOC $12,200 currently owed.
Rent $700.00 month

3 bed 1 bath house: Purchased with HELOC above
Rent $500.00 month

1 lot: Currently owe $23,000, 9 years remain on loan

4 bed 2 bath house: Owe $97,000, 29 years remain on loan.

I earn $84,000 year at my current job, wife earns $24,000 year.

We do have some credit card debt but all the banks say that part is fine, it's the mortgages that are killing the debt to income ratio. I am actually going to pay off the cc debt today with my latest bonus.

How do I make myself look more attractive to lenders? There may be serious investor types around but I haven't found a way to network with them. It seems this state has one or two big players in each market then several small potatoes like me. How do I become important and be taken seriously at the banks. Do I need to become an LLC or Corp with a big business plan in hand when I walk thru the door?

Am I off base in my thinking with my investments and incomes listed above? Does somebody need to give me a smack on the back of the head and say "you're doing it wrong?"

[Mike V.]

First your credit score has nothing to do with debt to income ratio. The credit bureaus have no idea what your income is, just your debt and how much of that debt is being used. Your score will improve if you have 10K in cc debt spread over 10 cards with limits of 10K each versus just one card maxed out at 10K. So find out why your score is so low and work on raising it.
Second, find a bank that will count your rent against your debt payments. My bank lets me count 70% of my monthly collected rent against any debt payments. If you buy right you should be able to increase not decrease your purchasing ability.