DTI ratio too high because I haven't had my rental properties for 2 years?

[Chudney Wesley]

This summer I bought 2 rental properties cash, which are all rented and earning a good amount of income. I am now tapped out cash wise and would like to finance an additional rental property. A LO told me that because I could not show 2 years of rental income that rental income would not be counted, leaving my DTI ratio high because It looks like I am paying for the house from my annual salary (which i am not). Because my DTI ratio is high I do not qualify for alot of freddie mac and fannie mae type loans. Is there a way around this? If I transfer my current properties that are loan free into a LLC will this help? I am 27 still live with my parents have no current morgages, own 2 properties, 770 credit score and have been at my job for 8 years? I didn't think getting a loan would be so difficult. Does anyone have any suggestions? or do I just have the wrong loan officer? Is it easier/ smarter to just use the equity out of my rental properties?

[Dion DePaoli]

Just to clean up something I mentioned above.  I would have to check with an underwriter (been a minute since I retailed a loan) but actually in this setting with 2 free and clear properties with renters the two properties would not even need to be entered on to the application.  I believe as well, that reserve requirements for those two properties would also be negated.  

The general idea is the cash flow more than supports the property and on-going maintenance.   So there is no need to draw it into the liabilities for the Borrower.  This is only because those properties are free and clear.  If they had mortgages against them, then it all must be reported on application.  A borrower's duty on application is to report liabilities for evaluation.  Assets can be reported at the Borrower's discretion. 

So the net effect of those properties should be zero.  Like I said, I am guessing the LO has the application setup wrong and as such he is getting denials.   

In order to use the net rental income as supporting income for the Borrower in the future is where we get the 2 year rule.  The rule can be manually underwritten at the discretion of the Lender or some portfolio lenders may not have the rule.