Understanding debt to income ratio
As a newer investor, I'm really trying to figure out my next best step. I recently connected with a lender to prequalify for a conventional loan. We have great credit, have about 50% equity in our home, own another two homes we paid for in cash, and have about 25% more liquid cash than what we prequalified for. Can investors and lenders alike please lend me your expertise on this? I'm so confused why I can't use the amount of cash I have on hand to leverage more. Thanks!
Most Popular Reply
For the type of loan you are getting debt to income is crucial (to the lender.) The lender won't let you exceed about 33 or 35 % of your income in monthly payments. Your extra cash cannot be leveraged.
Try using a portfolio lender. This type of lender (usually at a local bank or credit union) may have a product that places more importance on the ability of the asset to make the mortgage payment, as well as meet the other financial requirements of the property.
Great question! Wishing you the best of luck on your next property.