Losses on Tax Return Hurting New Residential Mortgage

[Jackie P.]

So I'm blown away that after 20+ days of a mortgage lender having my tax returns (with schedule E losses), they now come back to me and tell me that I do not qualify for a new personal residential mortgage because my DTI is too high. The sole reason for that is the paper losses.

I have a credit score approaching 800. The only debt I have is the personal mortgage on the condo where I live now (which will be on the market soon) and my investment properties. I have strong assets in my IRAs/401Ks and am old enough to take distributions with no penalty, but not planning to if I don't need to.

New property is set to close on Sep 21 and seller has graciously given me a financing extension. He cannot do seller financing because he needs to buy another house. I need to live in condo until Nov 15 for the 2 out of 5 gain rollover or rent it out and then live in it for 2 months before I sell it. They have given me the option to rent it out, but I have to have an appraisal to show 30% equity. I probably only have 25%, although I guess I could pay the note down and make it be 30%.

It's basically a timing issue. They are using both payments, condo and new house note in my liabilities, even though the condo will disappear in two months or so. This is in Austin, so the market is hot, hot, hot and mine was the model.

Anyone have any suggestions as to how to solve this problem?

Jackie