Overcome Debt to Income (DTI) Ratio

[Brent Langlois]

I'm looking to acquire my second rental property and I'd like to use conventional financing, however it's looking like I'm going to hit a road block with a high DTI. Curios to hear how investors have overcome their high DTI ratios to get conventional financing (i.e. used a partner, significant cash reserves, etc..). It seems to me that unless you're paying cash or putting a significant amount down, your DTI will run up quickly with each acquired property.

With the new deal I'm looking at, and the lender agreeing to let me use 75% of the future rent income...I'm sitting at 0.57 with 0.45 being their requirement.

Input is much appreciated.

[Tony Hightower]

Most times lenders will not be required to count debt that will be paid off in a relatively short amount of time (6-10 months). Find out what that limit is for your lender.

Then as a strategy, see if you have a large payment debt that could be reduced to the time limit required. 

Example, I owe $12,000 on a truck loan that is $1,000/month. The bank will not count any debt that will be paid off in 6 months or less. So, paying $6,000 toward my truck payment will bring my loan term down to 6 months for a payoff.

This may or may not be an option for you. Talk with your lender about other options. Sometimes they can give you ideas. 

Don't give up, think outside the box for options.