The "what would you do in this situation" post...

[Shane H.]

Hey Everyone! Looking for some different perspectives, advice and incite on how someone else would tackle my current financial situation to get another deal.

The Goal - To tap into current equity on my primary residence to free up as much funds as possible for the next deal.

The Situation - My primary home has quite a bit of equity that I feel might be stuck. The current LTV for the first mortgage is 50/50, with the HELOC that I have, that makes the combined LTV on the primary residence 60/40. I don't want to sell the primary because I simply want to live here and I don't want to cash out refi because my rate is 2.25... I also have a Short Term Rental (80/20 LTV) that I have only had for 8 months. The problem that I'm running into is my DTI is now tapped because underwriters are not able to use my Short Term Rental income... Or are they? Has anyone else ran into this issue?

Some other facts... I don't have any "debt." No car payments, credit cards are all payed off every month, no boat... Just the normal bills insurance, utilities, minor subscription services. Also, I am a W2 employee that does a few Agent transactions on the side (would like this to be full time, but conversation for another time) and my wife is a 1099. So, my DTI is getting affected by the mortgage from the short term rental...

Any reply would be greatly appreciated. Please let me know if I'm leaving anything out! Thanks BP!

[Erik Browning]

Hi @Shane H. it's tough to give you exact advice without looking at your particular situation and your full financial profile, however let's try.

First, correct - most lenders will not count your STR income because it is not predictable. However there are lenders out there that will include the income if it is consistently producing - you will just have to use their DSCR or commercial products. DSCR will be at a higher rate vs. conventional rates and the asset's income will have to make sense. Same with commercial.

Are you able to clarify what you mean by saying the CLTV is 60/40? Are you saying you have taken the full draw of the HELOC? If so, what did you use it for? Or are you saying that you haven't used the funds of the HELOC yet and "if you were to use the funds" then it would be 60/40? Did you use it for the down payment on the STR?

Of course, don't sell the primary. You have a smoking deal.