Investment Loan affect on DTI??

Question

Although one can have up to 10 conventional mortgages, how does each one affect the next in terms of DTI? For instance, if I get a mortgage on an investment property (traditional or BRRR to refi), will I likely qualify for less than I currently would on my next deal or even my primary residence purchase? Would a few investment property loans make it more difficult to get approved for my next home loan, or does it not negatively affect my ability to get another loan if its a cash-flowing asset? Appreciate any thoughts.

Robin Simon · Answer

Yes - the more properties you keep piling up, the more stretched and complicated the DTI calculation becomes.  This is why most investors switch to "DSCR" loans one they hit around property #5 - since there is no DTI required for qualification, its purely based on the asset's cash flow potential

Jeremy Horton · Answer

So each payment you have to make is going to affect your DTI accordingly.

You would consistently qualify for less after each purchase you make. Now some places will use your rental income to increase your income and thus your DTI (will likely still be a net negative though). After 2 years it gets easier because they will be on your tax returns too. But you've taken lots of deductions by this time, so your income is lower too. so there's a few things going into it. They off of your gross income though.

Second - to get to 10 mortgages, or even 7, your credit requirements are going to be really high. Hard to have good credit when you apply for new cards to pay for rehabs (0% APR for a year, free money for a year), new mortgages, hard inquiries etc

Jay Hurst · Answer

@Ethan Kohler   VERY common misconception.  You can use the rental income of the properties you own, as well as 75% off the rental income on the property you are looking to purchase to offset the new mortgage. If you are buying cash flowing properties your debt to income should not actually increase much if at all.  You do have to have a competent loan officer who understand who to calculate rental income using tax returns but having your LO do their job should not be too much to ask.  Countless borrowers over the years have come to me saying that they do not qualify for conventional financing because they were told that by an LO or they just assumed I guess, but actually had no issue and in fact in some cases had very low debt to income.

of course DSCR loans are easier for the LO, and it some cases a handy tool, but do not assume you cannot qualify for a much better priced conventional loan. and as for all the "work" a borrower has to for a conventional loan vs DSCR is provide pay stubs/W-2's and tax returns. The LO should do everything else.

Jonathan Taylor · Answer

@Ethan Kohler conventional loans will affect your DTI but depends on the numbers of the property. You can use 75% of the rents reported on the schedule E as income, weighed against the mortgage payment. For DSCR loans, sometimes they report on credit which would affect your DTI but sometimes they dont. DSCR loans dont use DTI for loan qualifications so there isnt a limit to the amount of loans you can have.

Jesse L. Weaver · Answer

It gets easier. Yes lenders will hit your debt ratio with that mortgage payment but they should be able to use the income from that property if you have a signed lease. Hopefully the income is higher than the mortgage payment, effectively decreasing your DTI.

Investment Loan affect on DTI??

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