Purchasing a rental property, bank won’t grant loan due to income

[Ashley Marrazzo]

Hey everyone! 

My name is Ashley and I am a first time home buyer. I am looking to purchase a duplex or triplex. But they told me no! I refuse to hear that as an answer! 

I was Approved for an 800k loan at 3.5%. I have Excellent credit (800+)BUT my student loan debt to income ratio is 52%. I make 48k a year and have 77k in debt. Looking to put about 30k down. I also have ZERO expenses every month (other than student loan). 

They said that if I were to purchase a place I would be unable to afford it due to my income if a tenet were to leave or something were to come up. They also told me i had to have an additional 50k in my bank account for reserve funds. 

What are my different options??

do I put More money down does that change? What if I did a conventional loan with 5% down? Why do they say you only need to put 3.5% down but then need to have double that in reserve? Do I need To save up more money?

how can I make It possible to buy a property with my current situation!

thank you everyone! 

[Trevor Alexander]

Is this lender the one that pre-approved you for $800K and are now saying you aren't pre-approved?

Here's where I'm confused....to be approved for an $800,000 loan, you'd need approx. $12,000 in monthly gross income. You make $4,000 and would need another $8,000 in projected market rents from the multi-unit...something's not adding up.

Other notes:

First, you can only purchase a multi-unit for as low as 3.5% down with an FHA loan. A conventional loan would require 25% down.

Second, make sure your lender is utilizing the projected market rents from the unoccupied units. This counts towards your qualifying income.

Third, FHA's DU system will give an automated approve/eligible for someone with 800 credit up to 56.9% DTI. So, even the 52% DTI ratio they are telling you would still allow you to qualify.

4th, if student loans are in deferment make sure the lender is using .5% of total balance to calculate the payment and not the old formula of 1% total balance.

Lastly, FHA requires a self-sufficiency test for 3-4 unit purchases, which is a calculation to ensure worst case scenario all rents from all units (including yours) can cover the PITI payment. This won't show up on the automated underwriting system anywhere, and a Lender that didn't plan and calculate this ahead of time could be in for a rude awakening once the appraisal comes in and there's not enough rents to cover the PITI.