Debt-to-Income ratio on FHA Loan

[Reed Meyer]

I currently own one property through an FHA loan and I am looking to acquire a second one. I found a deal that would be cash flowing from day one. I would move into this new property and fully rent out my current 3-unit building. However, FHA rules require that I have a certain debt-to-income ratio in order to qualify for another FHA loan. Since my current property has not been recorded in my tax returns yet my total debt amount is included in this calculation but none of my income is. This feels ridiculous.

Does anyone know of any strategies/suggestions for getting around this semantic complexity? If the rental income from my current building were included in the calculation i would easily be able to pass this test and could purchase the property today. It feels ridiculous that it is not. Any ideas help!

[Alex Roter]

Hey @Reed Meyer, I understand your frustration-- I mean, the bigger picture makes sense! Since there are expenses associated with owning a property, the Lender needs to determine the net income (after expenses). Without the tax return, the Lender is basically left to "taking your word for it." 

Can you add a family member on the loan, who has sufficent income to meet the DTI ratio requirment?

Can you borrower a large sum of money from a family member or friend? 

Otherwise, you may have to wait until you file your 2021 tax return, and revisit your options thereafter.

There are Lenders who do not use DTI analysis whatsoever, however, these type of loans are only eligible for Non-owner occupied properties. Also, the down payment requirements are much larger (typically around 20-25% of the purchase price).