Question about DTI, Surprising lender response

[Greg R.]

Hey guys, first off thanks for taking the time and providing feedback. I got a very surprising response from a lender for a property that I'm in contract for. Short background, I own 3 properties... two of them multi family, and one short term rental. In both of my multi families I have positive cash flow. My SRT is a guest house that's attached to the property where I live. The guest house is generating more than 50% of my mortgage payment for that property.

So here's the scenario... I'm in contract to by a second home/ vacation home out of state. I contacted a lender in that state and provided a my info and he saw enough to give me a pre approval letter. As soon as I'm in contract I provided the lender all my documents, bank statements, check stubs, tax returns, etc.

So about 2 days in this guy tells me that all my properties are negative cash flow and that my DTI is too high and he can't get me approved for the loan. His rationale is that when he's looking at my tax returns he's looking at my write offs, such as depreciation, repairs/ renovation, mortgage interest, and concluding that since I'm writing off "x" amount, that I'm actually negative cash flow.

However, that's not what's happening in reality. One of my properties alone I'm almost 2k positive cash flow a month. I have signed leases and have years worth of bank statements to prove that I'm bringing in the rents (which I'm also claiming on my tax returns). I even called my CPA and he reviewed my taxes and said he though they were very strong and were in line with the other investors he works for. 

To add a little more context I just completed a refi on one of my multi family properties last week and I was easily approved and was even offered to pull out a significant amount of cash (+/- 200k), which I declined.

Further, I know this is a vacation rental, so there is no projected rental income that I can use toward qualification. I then asked the lender if I can just go 20% down non-owner occupied so I can use 75% of the projected rental income toward qualification and he said that even then my DTI would be too high and I still wouldn't qualify.

A little more context, the only debt I have other than my mortgages is a $500 car loan. I asked the lender if I paid off the car note if that would help the situation and he told me no. I am also a W2 employee have a very stable six-figure income (for many years) along with other sources of income.

At this point I'm wondering what's going on. Is the way that this guy is looking at my finances an industry standard? He seems to have a good reputation and apparently works for one of the top mortgage companies in town. He's saying that my actuals essentially don't matter. He's only looking at my 2019 & 2020 tax returns and is evaluating everything through that lens and his interpretation of my taxes. 

My current/ preferred lender (who is not licensed in the state where I'm looking to purchase) never had a problem getting me qualified for properties that are much more expensive than the vacation home I'm looking to purchase.

Please help me understand what's going on.

Much thanks!!!