Debt to income ratio with traditional loan financing big factor?

[Raeven S. Reivers]

Hi all! Some help if you have...So I decided to take the conventional route and managed to save up a 20% down payment on the 150k-250k range of multifamily properties(2-3 unit preferably).

The savings actually comes from the work I’m currently doing to help with the covid efforts or else it would take me about another year to save up this money again due to the good debt I have right now(5% interest on student loans).

To get specific I’m looking at a 35-40% debt to income ratio right now solely from my student loans unfortunately. I’ve yet to take the action to get pre-approved because of this issue. How much of a problem is this usually when attempting to get a lender? Are there any other options?

Thanks,

Raeven

[Jaysen Medhurst]

That's definitely going to be an issue, @Raeven S. Reivers. Most lenders don't want total DTI to be above 45-55%. That doesn't give you a lot of room to work with. You should still try to get pre-qualified, it can't hurt. Depending on the loan program, the bank may count part of any potential rental income.

If you run into trouble, it may be worth considering a commercial loan. Your personal credit still matters, but a commercial lender will be more concerned with the property's performance, specifically it's Debt Service Coverage Ratio. Terms won't be as good, though...