Plenty of Cash and Cashflow, cant get a loan

[Jack Okada]

My fiance and I have a 3 unit rental building in Oakland. We are currently occupying one while we were searching for a SFR to move to. Total rent once we move out will be approximately $7k. The mortgage is 2700 + about $500 for property tax.

I have a SFR rental property with 11 years left on a 15 year loan. The mortgage is $2200/mo, and another $500 ish for property tax.. It pulls in $3200 month in rent.

For debt, we have one zero percent interest car payment with balance of 25k.  Outside of that, all we have is my student loans of around $30k at 4.5% interest. 

I tried to get qualified for a home purchase of $810k with 20% down at 3.875% interest and could not get qualified with a 50% DTI ratio....we were at like 52% or something.

The first problem is they count a 25% vacancy rate, which is absurd in the areas where our rentals are. The second issue is that (and we havent gotten here yet) is that they are even assuming a positive income from the rentals on my tax returns. My SFR rental is definitely not showing positive income, because....why would I want to pay tax?! So once they dig into my taxes, itll be even worse from a DTI standpoint.

This seems crazy to me as we make plenty of money to afford the mortgage, but the 50% DTI ratio requirement once you tack on rentals is crippling. $3500 a month in positive cashflow from the Oakland 3 unit and another $500 from the SFR plus our salaries which are more than enough to qualify for this house without the rentals.

Does anyone have advice on how to overcome this?  $800k for a single family house is BARELY in the median home value range in a small bay area city that is cheaper than where we are now...How are other people able to get a loan?

[Caleb Heimsoth]

@Jack Okada

I don't know what your income is (outside of rentals), but you have fallen into a middle class mindset and "trap". You have a lot of debt and seem to be financing everything. At a DTI of 52 percent most conventional lenders wind lend to you.

I would refinance your rental with a 15 year loan to a 30 year loan. Then I would ditch the car loan. At zero percent interest and 30k, I am fairly confident you bought a new car. You don’t need a new car. That’s a terrible purchase. Car companies make more money off financing than normal purchases. Pay off the student loans too.

If you have 100k cash for the down payment, pay off the car and the student loans and then go buy the house.