Conventional Lenders Don't Like House Hacking Strategy

[Cherie Hampton]

Merry Christmas and Happy New Year BP Family! Has any house hackers run into issues getting a conventional loan for a new/primary residence due to taking a loss on prior years tax filing on multiunit? Otherwise considered a perfect scenario: W-2 income enough to cover the loan (without rental income) for new/primary residence, excellent credit scores, low debt to income, but due to the loss taken on taxes w/multiunit, new loan for a primary denied during underwriting (with several different lenders). If anyone has run into this or similar issue, is there a work around?  How do you get financing when you're ready to rent and move on from your house hack? The lenders agree the house hacking strategy is great for tax purposes but not for getting a loan on a new primary.  It seems that the borrower would have to rent their owner occupied unit to show a gain and then be able to get a loan for new primary residence...but miss out on the benefit of reduced cost of living, which doesn't make sense. I welcome any thoughts, comments, suggestions. Thanks in advance for any insight offered!

[Eric Johnson]

Hi Cherie, 

Yes, going conventional when you have new rental properties on credit report is always an issue. This is because when your DTI is calculated, it will include the payments on the investment property.

One option is to go longterm commercial financing (for NOO 1-4 unit investment rented investment properties). These notes are frequently not reported to the credit agencies and could free up some DTI bandwidth.

Hope this helps