Getting financing after 4 mortgages

[Chris M.]

I have a mortgage on my primary home, and 3 other mortgaged rental properties (making that 4). I have two other rental properties that I bought in cash. One I was able to get a HELOC on. The other, I tried to get a HELOC on and was denied because the bank said my DTI was too high. I asked the bank how they calculated it, and they are adding all the mortgage payments and HELOC to the debt side (even though all properties are cash flowing). In other posts, I've read that the bank should be using just my home mortgage on the debt side divided by net income. Is this because I've had the properties for less than 2 years?

Any ideas for how I can finance another purchase? I have equity and cash flow, and a decent paying job but the banks just don't seem to have any sense to them. I have no rich uncle to ask for private financing so I feel stuck because I can't think of any way to get financing even though I have enough for a down payment and carrying the debt.

[Shaun Weekes]

Hello Chris,

You hit the nail right on the head when you brought up your schedule E income.  By you saying that it's telling me that you bought these houses at least last year so here is an easy way to calculate your rental income PER property. 

Schedule E calculations are as follows:

Add line 21

Add line 19

Add line 18

Add line 9,12,16 ( if you're using the full PITI payment ) Which the bank will if you're using schedule E income.

Divide this number by 12 for your 2013 income and repeat the same method for 2012 Schedule E

So say that you made 48K on your W2 and -500 on your schedule E. Your income would be 4K - 500 = $3,500.00 per month then divide your total credit report debts by your income to figure out your DTI

$1,500.00 in debt / $3,500.00 in income will give you a DTI of 42.86%

Now if you would have purchased this home this year you could you 75% of the lease agreement.  So if the lease agreement is $1,000.00 then you could add $750.00 dollars to your W2 or Schedule C income or whatever you claim on your 1040's

In conclusion if you have a home on schedule E you won't be able to use the 75% calculation and if you bought the home in the same year you want to use the income you can use the 75% calculation.

It's really important to get with a broker or Loan officer who knows when to use the appropriate calculations and also is in it for the long run with you.  This way they will know your situation because they've done all your financing for years.