Help! My Rentals are keeping me from getting a personal home loan

[Jason Smith]

Hey guys, 

The banks are telling me that they can not loan to me for a personal home because of my Debt to Income is to high for their underwriting. 

I have been working to build my rental portfolio for the last few years and currently I have about 10 properties that cash flow over $7000 per month all together.  I also have earned income as well.  According to multiple banks they can only count 75% of the income of each property which is really jacking up our Debt To Income.  We have about $30k /month in income and about $12k/month expenses leaving a surplus cash of $18k/month.

We were wanting to purchase a new home for ourselves and have the cash flow to make it work. However the banks that are underwriting these deals are killing us (Frost and PenFed).
The home we are wanting to purchase will cost about the same as we are paying now so the Debt to Income should remain the same.  

I know I cannot be the only one that has ever had this issue.  My question is, What are my options? How do I navigate this seemingly ignorant problem?

[Patrick Roberts]

Find a non-bank lender or broker who offers bank statements loans - this is literally the situation that these products are meant to tackle. Also, if your rentals are already in service and the banks are using a blanket 75% of gross rents figure, theyre probably incompetent in their underwriting. They should be using a net rental income analysis which would produce an income figure specific to each property based on your reporting on Sched E. This is why I hate on big banks for mortgages - they suck at them. 

Also, I normally try not to call out people or pick fights on social media, but please do not refi your loans into DSCRs thinking this will fix the problem. Almost all DSCRs require a personal guarantee, and PG'ing a loan WILL have the exact same effect on your DTI, regardless of whether the DSCR lender reports it on your personal credit report. Aside from all of the systems that lenders use to find undisclosed debt, one of the questions you'll be asked on the URLA/1003 (the application required for all primary residence mortgages) is basically "Are you responsible for any debt besides what we have already found?" If you lie in answering this question, it's straight-up mortgage fraud, which is exactly what you'd be doing if you answer No to this question while having PG'd a DSCR loan. Only nonrecourse loans will not affect your personal DTI - if you personally guarantee the debt, you're going to take the DTI hit for it unless you can qualify for it to be excluded.

Find a local lender who is skilled in working with self-employed and investor clients and talk through your situation with them.