Waiting on the IRS to qualify for refi

[Darren Looker]

I have a LTR SFH in Dallas, TX that I am trying to refi with cash out. I am in the middle of the process and I was told that I need my 2020 and 2021 tax return processed by the IRS to confirm rental income. Fannie Mae rules don't allow a tax return and a letter from my CPA stating the accuracy to be counted for rental income. Without rental income from the LTR, my DTI is too high to get qualified. I've been waiting on my 2020 tax returns to be processed by the IRS for 4 months now and expect to be waiting for 2 more months. My 2021 return has been filed but will likely take at least 30 more days. In the meantime, my rate lock will expire.

My current mortgage is 5.5% and my rate lock is at 4.625%.

Appraisal on house is $555K and loan is for $413K with payoff amount of about $345K.

The property does not currently cash flow but has great appreciation and is in a highly desirable area.

I have tenants in place on a month to month basis that have been there more than 1 year.

I also have a short term rental that cash flows well.

Are there other refi options for someone in my situation? Is there a way to get credit for the rental income?

I would consider a DSCR loan but don't know if I can get cash out and I don't know anything about a seasoning period.

I am seriously considering conversion to STR and have run the numbers and talked to other operators in the area but think that I need to refi before conversion because of lending requirements.

I would want to use the cash out to furnish the property if I go that route.

Thanks in advance for any help.

[Alex Roter]

Hey @Darren Looker, I've come across DSCR loan programs that allow for up to 75% Loan-to-Value on a Cash-Out Refi. Typical rates in today's market are in the 6% range with absolutely zero DTI requirements. You may be able to find seasoning requirements as low as 3 months (from the date the deed was recorded).