Stuck in neutral because of DTI

[Alan Howard]

Hello BP, 

I'm a bit stuck as I have about 75K which I was planning to use part for a down payment towards a quad-plex. However, my high debt to income is hampering me from obtaining financing. I've been wracking my brain trying to figure out another means of getting financed. I am new to investing and have no private money connections. Also, hard money isn't appropriate for buying and holding. Has anyone out there been in this position, if so, how were you able to get financing to move forward? How is it that investors are able to attain multiple loans without maxing out their DTI? Perhaps I'm trying to start to big and need to stay in my financial lane with a brrrr, flip, or cash rental purchase. What are your thoughts?

[Marty Johnston]

@Alan Howard - Other's nailed it, so I'll just echo. Commercial loans don't look to your W2 income like residential mortgages. They look to the rental income (or potential market rents if vacant) to evaluate the Debt Service Coverage Ratio. This will range from as little as 0.75 - 1.5 (on the other extreme) of the rental income. 1.00 being equivalent to what the property rents for (cover the PITI payments) and 1.5 DSCR meaning if the mortgage payment was $1,000/mo the rental income would have to equal $1,500 or better. There are many who sit around 1.0 - 1.2 DSCR.

Bottom line, there are many options out there! Might just mean going Commercial vs Residential.

Cheers!

MJ