Another strategy besides DSCR Loan to keep rental when income low

Green Bay, Wisconsin
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Another strategy besides DSCR Loan to keep rental when income low

Laurie Austin
Realtor · Member since 2018 · 5 posts · 1 vote

I have a condo in a high appreciating area of Texas that cash flows $100 a month and used to be my primary residence-great loan at 3% on it and about 75K in equity.

I want to buy a home in another state on a lake to STR. My thought was to use conventional financing as my primary residence to get this new property however my income does not qualify me for the amount I need as they are only counting 75% of the income from the condo rental and I'm self employed which means my Adjusted gross ends up being low. Basically I need a much bigger downpayment or adjust my purchase price to buy conventional and keep the condo.


I want to keep the condo but see these as my only options-am I missing anything creative I could do? 

1. DSCR loan on the new lake house property but rates are ridiculously high which cuts in the margins substantially.

2.   Sell the condo take the equity and purchase 1 or 2 properties in the new area.   (least attractive to me)

3. Getting a HELOC is not attractive as the pmt on the condo plus the HELOC pmt would be similar to just doing the DSCR loan... and increases my DTI ratio...

What am I missing-help me get creative here to be able to keep the old property and buy the new.   

Thanks-Laurie

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Brandon BeardtPro Member
Lender · La Crescenta, CA · Member since 2021 · 261 posts · 157 votes
3y
Quote from @Laurie Austin:

I have a condo in a high appreciating area of Texas that cash flows $100 a month and used to be my primary residence-great loan at 3% on it and about 75K in equity.

I want to buy a home in another state on a lake to STR. My thought was to use conventional financing as my primary residence to get this new property however my income does not qualify me for the amount I need as they are only counting 75% of the income from the condo rental and I'm self employed which means my Adjusted gross ends up being low. Basically I need a much bigger downpayment or adjust my purchase price to buy conventional and keep the condo.


I want to keep the condo but see these as my only options-am I missing anything creative I could do? 

1. DSCR loan on the new lake house property but rates are ridiculously high which cuts in the margins substantially.

2.   Sell the condo take the equity and purchase 1 or 2 properties in the new area.   (least attractive to me)

3. Getting a HELOC is not attractive as the pmt on the condo plus the HELOC pmt would be similar to just doing the DSCR loan... and increases my DTI ratio...

What am I missing-help me get creative here to be able to keep the old property and buy the new.   

Thanks-Laurie

Hi Laurie,

One creative option you can try exploring is trying to find any sort of seller financing deal for this lake property. Of course, that's easier said than done, but that's just one option that popped into my mind when reading your post. It sounds like your main goal is to keep the condo while being able to purchase another property, & if that's the case, keep the condo then. If doing so means your DTI will be out of line when trying purchasing more property, you will have to get non-conventional alternative financing to help purchase more property. From reading your post, it seems you don't want to increase your DTI at all, which is where these alternative programs come in, such as the DSCR you mentioned. DTI isn't even considered with this type of financing. Like you said though, you'll more than likely have to come up with a higher down payment, and the rate will be higher, but that's the trade off.


[email protected]818-726-2418
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  • Brandon BeardtPro Member
    Lender · La Crescenta, CA · Member since 2021 · 261 posts · 157 votes
    3y
    Quote from @Laurie Austin:

    I have a condo in a high appreciating area of Texas that cash flows $100 a month and used to be my primary residence-great loan at 3% on it and about 75K in equity.

    I want to buy a home in another state on a lake to STR. My thought was to use conventional financing as my primary residence to get this new property however my income does not qualify me for the amount I need as they are only counting 75% of the income from the condo rental and I'm self employed which means my Adjusted gross ends up being low. Basically I need a much bigger downpayment or adjust my purchase price to buy conventional and keep the condo.


    I want to keep the condo but see these as my only options-am I missing anything creative I could do? 

    1. DSCR loan on the new lake house property but rates are ridiculously high which cuts in the margins substantially.

    2.   Sell the condo take the equity and purchase 1 or 2 properties in the new area.   (least attractive to me)

    3. Getting a HELOC is not attractive as the pmt on the condo plus the HELOC pmt would be similar to just doing the DSCR loan... and increases my DTI ratio...

    What am I missing-help me get creative here to be able to keep the old property and buy the new.   

    Thanks-Laurie

    Hi Laurie,

    One creative option you can try exploring is trying to find any sort of seller financing deal for this lake property. Of course, that's easier said than done, but that's just one option that popped into my mind when reading your post. It sounds like your main goal is to keep the condo while being able to purchase another property, & if that's the case, keep the condo then. If doing so means your DTI will be out of line when trying purchasing more property, you will have to get non-conventional alternative financing to help purchase more property. From reading your post, it seems you don't want to increase your DTI at all, which is where these alternative programs come in, such as the DSCR you mentioned. DTI isn't even considered with this type of financing. Like you said though, you'll more than likely have to come up with a higher down payment, and the rate will be higher, but that's the trade off.


    [email protected]818-726-2418
    1Reply
  • Lyndsay Zwirlein
    Lender · Member since 2020 · 331 posts · 209 votes
    3y
    Quote from @Laurie Austin:

    I have a condo in a high appreciating area of Texas that cash flows $100 a month and used to be my primary residence-great loan at 3% on it and about 75K in equity.

    I want to buy a home in another state on a lake to STR. My thought was to use conventional financing as my primary residence to get this new property however my income does not qualify me for the amount I need as they are only counting 75% of the income from the condo rental and I'm self employed which means my Adjusted gross ends up being low. Basically I need a much bigger downpayment or adjust my purchase price to buy conventional and keep the condo.


    I want to keep the condo but see these as my only options-am I missing anything creative I could do? 

    1. DSCR loan on the new lake house property but rates are ridiculously high which cuts in the margins substantially.

    2.   Sell the condo take the equity and purchase 1 or 2 properties in the new area.   (least attractive to me)

    3. Getting a HELOC is not attractive as the pmt on the condo plus the HELOC pmt would be similar to just doing the DSCR loan... and increases my DTI ratio...

    What am I missing-help me get creative here to be able to keep the old property and buy the new.   

    Thanks-Laurie


    Hey Laurie!! I am born & raised in Wisco! Just moved to Cleveland this year, but miss home! 

    Another creative option could be doing interest only DSCR loan on the new purchase. Most programs have a 30 or 40 year IO option. You can then refinance out of it after the prepayment period (usually 3 yrs). A lot of my clients will keep a separate account on the side where they're contributing each month and can ultimately apply that towards principal. But it allows you to do it on your terms and keep healthy cash flow as rates continue to increase.

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  • Ashley Cross
    Lender · Columbus, OH · Member since 2020 · 202 posts · 214 votes
    3y

    Instead of trying to do a second home loan or primary home loan, you can us conventional financing for an investment property which allows 15% down. You're going to have to pay PMI but in this scenario you can use the appraiser's opinion of rent to offset the mortgage. The next hurdle will be pinning down the average rents in that area which may be tough. Another option will be bringing a partner to the table if you can find someone with high income and great credit that is willing to partner.

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