How to maximize DTI 30yr or ARM?

[Sam D.]

Greetings Bigger Pockets,

I am a long time reader and first time poster. I am interested in buying multiple SFH properties and like to use Fannie Mae/Conventional loans as much as possible due to their great rates.

To do so, a key challenge is to keep the DTI (Debt to Income Ratio) low. Based on my research 30YR Fixed seems to be the best choice than a 7/1 ARM, even though the ARM has a lower rate.

My reasoning is because with an ARM, when the DTI is computed for the next property they will compute my loan payment based on ARM base rate + 2% to buffer any increases. This will make the rate higher than a 30 yr fixed loan. Does this sound right? I appreciate your thoughts.

Thanks.

[Chris Mason]

Originally posted by @Sam D.:

Greetings Bigger Pockets,

I am a long time reader and first time poster. I am interested in buying multiple SFH properties and like to use Fannie Mae/Conventional loans as much as possible due to their great rates.

To do so, a key challenge is to keep the DTI (Debt to Income Ratio) low. Based on my research 30YR Fixed seems to be the best choice than a 7/1 ARM, even though the ARM has a lower rate.

My reasoning is because with an ARM, when the DTI is computed for the next property they will compute my loan payment based on ARM base rate + 2% to buffer any increases. This will make the rate higher than a 30 yr fixed loan. Does this sound right? I appreciate your thoughts.

Thanks.

 Hi Sam D.,

If you are buying good cashflow positive real estate and working with an REI-friendly lender, you should not need to worry about DTI until you reach the point where you are thinking of quitting your day-job.

5/1 ARMs you generally go off the note rate plus the max adjustment. 7/1 ARMs you generally go off the note rate.