How to locate 50% DTI lenders

[Chris May]

I've got a problem that I'm sure many other people have faced, but I'm running into dead ends left and right.

We owner occupy a duplex in a very high cost area, and are trying to move to North Carolina. We'd like to buy a SFR or duplex to owner occupy there.

The issue is that since we can only use 75% of the rents on our current duplex towards income, our DTI looks artificially high. We're baaarely under 50% DTI right now. I've heard there are 50% DTI loans out there, but I can't find anyone who offers them.

Any thoughts on how to search for these loan products? I'm not interested in balloon loans but could entertain a 7/1 ARM or something similar. An 80/10/10 situation world be ideal, but I haven't seen those for high DTI borrowers.

[Chris Mason]

Originally posted by @Chris May:

Originally posted by @Chris Mason:

Originally posted by @Chris May:

I've got a problem that I'm sure many other people have faced, but I'm running into dead ends left and right.

We owner occupy a duplex in a very high cost area, and are trying to move to North Carolina. We'd like to buy a SFR or duplex to owner occupy there.

The issue is that since we can only use 75% of the rents on our current duplex towards income, our DTI looks artificially high. We're baaarely under 50% DTI right now. I've heard there are 50% DTI loans out there, but I can't find anyone who offers them.

Any thoughts on how to search for these loan products? I'm not interested in balloon loans but could entertain a 7/1 ARM or something similar. An 80/10/10 situation world be ideal, but I haven't seen those for high DTI borrowers.

 Hi Chris,

You probably just aren't finding anyone REI friendly in NC. DTI to 50% isn't a huge deal -- most lenders will leave a little buffer in there for preapproval purposes, maybe go to 47% or 48% to account for unexpected HOA dues, rates changing, unusually high property taxes for the area, homeowner's insurance coming in higher than expected, etc. If I preapprove at 47%, then 1/3 of the time it'll go under contract at 49% and 1/3 of the time at 45%.

But DTI shouldn't be a problem unless you are trying to go crazy, which I assume you aren't. The other unit of your duplex, the 75% thing does not apply. It's actual cashflow that is used, based on your tax returns, and actual PITI. The unit you are departing, it'll be the 75% thing, but you can count rent from that one too, assuming vanilla FNMA financing.

Good luck.

 Unfortunately, the previous owners also owner-occupied, but in the other unit, so we don't have 2 years of rental income history to be able to use the full rents.

 Two years of rent appearing on tax returns is an overlay, not a requirement. Keep dialing for dollars. Good luck.