All Forum Posts by: Phil Brandt

The answer was to find a lender who would allow a Letter of Explanation to evidence the line item switch. This passed underwriting with financials supporting HOA dues aligned to line item 11. The key in these situations is to establish a personal relationship with a lender so that they will take the time to understand the issue and have the bandwidth to ensure any complications are resolved. Moreover, with a smaller lender there will often be less of a latency between the lending agent and underwriter, which will ensure any complications are sorted out expediently.

The other option was to re-file my taxes, but given the IRS slow down it would have likely taken months for the amended return to have been processed, which would have been required before closing.

Hi investors,

I live in Brooklyn and have rental properties in D.C. and CT.

I am looking for advice to a specific issue I can't quite figure out.

I recently found a great single family investment opportunity in Denver. However, while I was working with the lender I realized that on my 2019 schedule E I put all my HOA dues on line 11 (management expenses) and apparently they should be on line 19 (other). Bottom line, my HOA dues for all rental properties (7 condos) are now being double counted in the underwriting system and it is just putting me over on the DTI. I could alternatively finance as an investment property (80 LTV and 4.0%) but would rather do it at a 90 LTV and 3.25%.

I explained that Fannie guidelines allow a lender to use the 75% of rental income (using lease agreements) minus PITIA (principal, interest, taxes, insurance, and association dues) instead of the schedule E if they have a valid reason for doing so (e.g., my HOA dues will otherwise be double counted).

I don't have any underwriter contacts and was wondering if anyone had suggestions for navigating this situation before I lose the deal.  Perhaps there is a precedent for handling this type of mistake...

Thanks!

Happy to field questions about investment opportunities in Brooklyn!