Help me figure out why we can’t qualify for a loan.

[Ashley Wallace]

My husband and I own our house outright. We have a HELOC on the house with an available line of $330K. We have $120K drawn from it right now. We also an investment property under contract to be sold for $815K. We owe $385K on the investment property. We Airbnb the investment property more than paying for the expensive. Last year we cleared about $1100 a month on it. We are trying to get a pre-approval letter from a bank so that we can build a house. Total cost of that would be $580K. My husband makes $114K annually and I run the Airbnb. We owe about $9000 on one of our cars. We have tried to get a pre-approval letter with several banks and they all are saying we must sell our primary first. Why can't we get a pre-approval letter? Are we just dealing with the wrong banks? Is there something that we are doing wrong in the way we are operating? We are super frustrated and would love some help!

[Wayne Brooks]

@Ashley Wallace

They should have given you a specific reason.....sounds like your DTI maybe.

Your income is about $10,500/mo., assuming your tax return shows the $1,000/mo from the investment property and no work related expenses declared on your husband’s $114,000/year, and that has been the average over two years.

Conventional DTI limit is 36% with I believe up to 45% depending on credit score and reserves.

The PITI on your new home will be about $3500 or so?

Your current heloc....they will calculate a payment required if you max it out, unless to agree to have it capped where it is, then they’d use the $120k...$?/mo.

You have a car payment...how much is that per month.

Assuming no other long term debts, add those three up and see what you have....they can’t exceed 36-45% of your $10,500 or so/mo.

I’m guessing that’s where your problem is.