Factors affecting conventional mortgage origination

[Patrick Menefee]

Hey all,

Looking at 2 potential investment properties and trying to evaluate some of the criteria a lender would use to underwrite me. As a starting point, i have a mortgage on my primary residence.

The first house i can easily cover down+closing and have no concerns. However the second house would only leave me with a very small amount of reserves, and would be my third mortgage. I’m not concerned with the financials on my end as the properties would cash flow well, I have access to a line of credit if an emergency arises, and my reserves will be replenished quickly enough.

My concern is how this would look to a lender. With good credit, should I expect this lack of liquidity after the final house to cause any issues? And if so, should I expect that to show in the form of a higher interest rate, or is there potential to not get approved? Also, do they factor in rental income with DTI calculations? If so that won't be a concern as it'd be under 20%, but if not I'd be around 35%. Will that cause any concern?

Thanks in advance!