Help with lowering my DTI

[Priscilla Yeon]

Hello! I have a unique situation that requires a unique solution. Before I knew anything about real estate or finances, my family (brother & mother) signed me onto our home title (we're all listed under the title) and refinanced the mortgage under (only) my name during the pandemic, with a conventional loan. I was told I would still be able to purchase my first home with an FHA later. Ive finally saved up enough to put up to 10% down for my first home that I would like to house hack (3+bed townhome), but my DTI is too high with the mortgage. And since my family and I have essentially been splitting the mortgage (while I rent elsewhere) and my 2021 taxes report the mortgage as a "loss", I am now being told I have significantly less buying power where now I think I could only afford a 2 bed condo. I thought about "leasing" to a friend, but I would have to sign another lease somewhere else that would follow that timeline. Is there anything that I can do to lower my DTI so I can purchase a $500k+ home within the next year????

[Trevor Alexander]

Hi Priscilla -- 

Is the bank telling you what your DTI is currently? FHA will give an automated approve/eligible up to 56.9% DTI. If your close, there's creative ways to get it under that limit.

There's nothing you can really do with your current house to improve your DTI unless you refinance again out of your name into your brother and mother's name. Leasing it out to a friend won't work either immediately because Lenders will still go off of tax returns. You could write off less when you file this year and show a net profit, and that would help. Of course, you'd need to wait until taxes are filed next year, and would pay more taxes from the additional income.

Next option would be to have your brother or mother co-sign for you. Sounds like they owe you one :) Once rates drop in the future refinance them off the loan.

Last option would be to consider househacking a multi-unit so you can use the rents to offset your mortgage payment, thereby increasing your purchase power.

Hope that helps!