Financing for an investment property with high DTI?

[Eva Kaufman]

Hello Everybody,

Real estate newbie here with some questions regarding how to finance an investment property with high DTI.

A little about our financial situation, I am currently a medical student and my husband works full time. We have about 70-80K cash sitting in our savings account and would like to make good use of it. We have excellent credit score (750+). However, our income currently is only 40K from my husband's job. We have a conventional mortgage for our primary residence and a car payment. We have some investment in the stock market. 

Ideally, our goal is to use some of our savings to put towards a rental property to generate passive income. From my prior experience in getting a mortgage, I understand high DTI can be a huge road block. I have considered HELOC since we paid 50% down for our mortgage, but not sure how feasible it is.

Would it be possible for us to invest in a rental property with our financial situation? Would crowdfunding be a good alternative? or should we just focus on investing in stock market for now until I graduate? 

Thank you so much and I truly appreciate your input!

[Eva Kaufman]

Thank you @Nick Velez. I was just looking at DSCR loans the other day, now I feel better about it. Thank so much!

[Andrew Postell]

@Eva Kaufman as mentioned above plenty of loans are available to you through the right lenders. Some might call them "asset based loans". Some might call them "DSCR loans". Whatever they call them just know that it's not "conventional" loans that measure things like DTI.

Generally speaking there are 2 main types of loans for investors: “Conventional” and “Portfolio”

Conventional - I'll define these as loans that come from Fannie Mae and Freddie Mac (if you recognize those names). These loans are all 30 year fixed rate loans. They have the lowest rates we can find and since they are 30 year fixed...they allow us to cash flow better...which helps us qualify for other loans later. The draw back to these loans is that they are more paperwork heavy than the other "portfolio" types of loans....but if you have ever received a loan on your primary home, it's likely that you will go through the same type of paperwork here with conventional lending. Fannie/Freddie money = Fannie/Freddie rules. NOT the bank's own money.

Portfolio - I'll define these loans as loans that come from the bank's own "portfolio" of money. Sometimes referred to as "commercial" loans. These loans are a lot more flexible than "conventional" loans. Bank's money = Bank's rules. If they like you, then maybe they will lend to you. But since there is a limit to how much money the bank has access to....their rate will be higher...and usually a shorter term. The most common portfolio style loan in Texas is a 20 year adjustable rate loan. These loans are easier to get but the terms are different.

Anyway, I hope this helps in some way.  Thanks!