DTI and Living Expenses

[Brian Wilson]

Good Morning BP!

This year I'll be acquiring my first rental property as I'm finally in a financial position to do so. I have a 2 pronged question. I currently put all of my living expenses on a credit card (including rent) as the points returned allow me to travel for free (I have never paid a dollar of interest on a credit card in 5 years). My question is how does this factor into the evaluation process conducted by a lender prior to issuance of a conventional mortgage that is strictly an investment property? If I pay cash and then cash out refi into a conventional will my DTI go against me if the property is cash flowing?

While I know it will vary on a case by case basis and what my actual DTI ratio is, I'm just curious if anyone has any insights/advice. I'm trying to determine if I'll need to stop putting my rent on my CC 3 months prior to applying for financing or shifting around how I pay for my monthly living costs.

I know in commercial lending the asset is used for determination of loan issuance more than the individual purchasing the asset, being that residential is more about the purchaser I was curious to what extent my current debt handling would impact me.

[Angel V.]

@Brian Wilson im not expert but have done many loans in the last 20 yrs and here is how I understand it...

the balance on your credit card that gets reported on your credit report (based on your billing cycle) will be reflected on your "credit Usage" not on your DTI. Keep the balance low around 30% or less of the total credit available and you'll be fine.

The DTI gets calculated using the "minimum payments". That minimum payment that is displayed on the credit report, should match the CC statement payment due. My lender just pulled my credit report (I'm in the middle of a refi for BRRRR), I also pay my cards every month, and depending on the date the credit gets pulled, sometimes it shows a balance and even a payment due (usually super low payment like $10).

Sounds like you are heading on the right direction. Good luck!