Debt to Income Ratio too high!!! I need HELP.

[Carlos Handler]

Hi Everyone! My name is Carlos, I’m new to this website. I would always read the forums for information I needed an answer for. I’m on here because I need advice. My wife and I currently own 6 properties, I’ve been talking to my lender and I was told my debt to income ratio is too high. The situation I’m in right now is this. We are looking to purchase a duplex and we were going to do it with a hard money loan and after 6 months refinance out but my lender said I might not qualify. I was researching on a different thread on LendingOne and LoanGuys and I realized it’s not an easy process and not worth it. My wife and I have the 25% down payment for this duplex & we would also like to continue purchasing but not sure how we can fund this investment. This is where I need your help. Thank you in advance. 

[Matt Devincenzo]

So first question I have is what is causing your DTI to be too high specifically? Is there a specific debt obligation like a car or boat etc. that is causing it?

I have a suspicion from seeing other similar threads that your lender may be calc'ing your DTI incorrectly. Your mortgage debts should be offset by the property rent that is collected and then the net result from that added to your income or debt. I've seen a few times here on BP where the DTI was being done by adding all income, adding all debt and then coming up with the DTI and this can incorrectly make it appear higher than it should.

The other thing is are the calculations being done based upon the duplex also generating income which is added to your totals? That may change the scenario as well. 

And finally let's say he's right and you're borderline, you just need a backup plan. I'd evaluate the possibility of refinancing using a DSCR type loan. It will have a higher interest rate, but will keep this transaction on track, and in a couple years as rents increase and values rise etc, you can always refi again then to drop the rate more.