How do I get another mortgage?

Question

Hello BP,

I moved to the Denver area for my career In March. I was unhappy with my income at my job in Kansas so I took a job here. I'm working a lot of overtime so I'm making triple the income now, which is about at $100,000. I've purchased a townhouse in Westminster for $300,000 to live in and rent the extra rooms. The renters pay pretty much the whole mortgage for me. I have to pay a little bit because I decided to live in the master bedroom instead of renting that room out. But it's very cheap living. I'm enjoying the benefits of owning property and would like to buy more in the near future. I'm currently saving for the next property. I'm saving around $3,000-$4,000 per month and have about $13,000 in liquid cash after I spent everything on my current one. I was thinking about buying the next one back where I'm from in Kansas City because the properties are cheaper. It seems like it might be a little easier to cash flow there. I just applied to get a pre-approval but I got disappointing news from the mortgage company. They aren't able to count my overtime hours as income and they aren't able to count my rental income as my own income. So even though my expenses are absurdly low, I can't qualify for another mortgage. They say my debt to income ratio is too high, even though it is so low that I'm able to save about 60% of my income. What do I do now? Do I find another lender? Do I find a partner? The major question isn't if I can do this; it's how do I do this.

Thanks for the input!

Rick

Gordon Cuffe · Answer

@rick

@Rick NovotnyWhen there is a will there is a way. You will just have to use a private lender at first until you have had 2 years of overtime to show your next lender. Lenders will never count roomate income as you will never report it as income on your tax return. You can pm for the name of a private lender as I guess I can not promote lenders or properties. The interest rate will be higher than conventional loans so you will want to get the property at a good price so that you allready have built in equity. You will have plenty of equity when you go to refinance.

Andrew Syrios · Answer

There are a lot of regulations that all banks have to follow, but I will say that every bank looks at things a bit differently. Some banks decline us, some say yes quickly and some eventually say yes after asking what seems like thousands of questions. So I would try around, particularly with smaller, local banks that tend to be more flexible.

On another note, as far as out-of-state investing goes, I would be very careful in that regard. I wrote an article a while back you might find helpful on the subject: https://www.biggerpockets.com/renewsblog/2014/12/23/investing-out-of-state-essential-items-to-vet/

Bill S. · Answer

@Rick Novotny slow down and save some more money. Waiting another 6 months or a year is probably not the end of the world for you. The other option would be to do some sort of creative financing (find a warp, sub2 or owner carry) that would get you in your new place.

Jay Barndt · Answer

Hi rick, first off great job on your investments so far! on the subject of your mortgages, i would check with local smaller named banks for a portfolio lender, also see if their is any way to work a heloc from your properties, private money lenders would be a good avenue, also seller finance is a great way to get more properties, the hardest part of REI is the more you try to do the worse banks are to deal with and creative financing comes into play, i would also encourage if you have not already jump into searching for funding, seller finance, creative finance on BP and listen to the podcasts, read into the forums ect. to get your creative gears moving. hope this was some help, best of luck

Jay.

Upen Patel · Answer

@Rick Novotny The lender is right. To be able to use your overtime income, you have to show that you have consistently been earning it for 2 yrs. With regards to your roommate rental income, if you don't have executed lease agreements (which is what I am guessing what you are doing), then the rental income can't be used.

This has got nothing to do with the lender and everything to do with agency guidelines. If you speak with a private/hard money lender then they will be happy to lend to you.

How do I get another mortgage?

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