High DTI and How to Get over It For A HELOC (W2 is a trap)

[Jacob Trogan]

I am a little frustrated here but I wanted to get advice on how any of you may overcome DTI limitations when applying for loans or HELOC/LOC?

I applied for a HELOC and the equity is there and my credit is 750+ but the banks look at DTI also - I should have known this since I saw it with many investors I spoke to as a traditional lender. This is why I moved into hard money but basically I have a small base salary that I specifically negotiated to qualify for stuff like this but the bank qualifies you based on if you max out the LOC which if I did it would put me at 50% DTI or so with just my mortgage and HELOC. I can afford this easily since my mortgage is well below my means taking into account commission and other incomes that also do not have 2 years of history but my problem is just that I do not have two years of history. I understand due to working in Hard Money I can put debts into an LLC but my primary residence is in my personal name. Also something to note I have more liquid assets I can show than the LOC I am asking for... kind of frustrating...

Anyways would I be able to move this primary into an LLC? So the mortgage would not be looked at as my personal debt, I am guessing not... Or do any of you know of banks who would look at this situation more comprehensively... I applied with 5 banks/credit unions or so just to compare my options and have gotten denied by 3. Since it is due to DTI problems I believe the same fate will happen with the other 2.

As for the title. I love w2 income and it is a tool to qualify for the best loans from Fannie/Freddie but being limited to it and sticking to that method seems to put people in a very narrow mindset of following what lenders tell them. They think there is no way to overcome qualifying for loans without 2 years of work history, high DTI, blah blah blah I have already seen most of my preconceived notions of who can qualify for loans blown out of the water. Don't ask if you can qualify ask who will qualify me. People are competing for your business to lend you money is the great realization I have had as a lender. So with that in mind I am open to some insight. I am still learning many much things.

[Greg Scott]

Putting your residence into an LLC doesn't seem like it would help much. The banks are going to want to see the LLC can make the payments. Since there is zero rental income on your personal residence, it would appear you would need to back the loan, so all you have done is gotten a higher interest rate bank loan.

It would seem to me the best solution is to go outside the real estate loan system.  If you can afford the debt, see if you can find someone to give you a personal loan.  Hopefully someone you know and trust could use a better interest rate on their cash.  It's better to make 5% than 1%.  You could even post some of your personal property (cars / jewelry) as collateral in the event of default.

If you can buy another cash-flowing rent property or two, that should help your DTI so you can qualify. It appears just reaching 2-years on your taxes will also solve the problem. In either case, you could probably set this loan up as a short two-year loan, so they know exactly when they are getting paid.