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Debt to Income ratio

ERG07 39 18 March 29, 2016 at 07:22 PM
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Last Edited by ERG07 March 29, 2016 at 07:24 PM
We applied for a cash out refi a few weeks ago and just found out today that we are being turned down due to a high debt to income ratio. The loan agent isn't very helpful at this time and I'm tryiing to figure out how they came to the DTI ratio. Looking online, they make it look very simple but our situation is a bit more complex than montly income/current debt. For example, we own two other homes with mortgages. Does anyone know if the rent we receive count towards the income side? Does property tax factor in on the debt side? If so, for all 3 homes? No matter how I run the numbers, I can't get to the ratio that they have. Help pls!!!

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#2
without more information(your numbers) its hard to answer your question.
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#3
Do you declare the income from the rentals on your tax returns?
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E finita la cuccagna

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#4
Are they including a bad debt assumption on the rent income? e.g. say your rent income is $1000 but, over time you have to assume there will be periods where the property is not rented or you have a deadbeat in there, so assume 10-20% "bad debt" or "no tenant".

Property tax and such should be deducted from the income; e.g. it's net income for the rentals.

Also I was surprised when we bought our first house that the lender was considering student loans NOT in repayment as a monthly debt. Yes NOT in repayment. They had some formula to determine what the "virtual monthly payment" would be.
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#5
Quote from ERG07 View Post :
We applied for a cash out refi a few weeks ago and just found out today that we are being turned down due to a high debt to income ratio. The loan agent isn't very helpful at this time and I'm tryiing to figure out how they came to the DTI ratio. Looking online, they make it look very simple but our situation is a bit more complex than montly income/current debt. For example, we own two other homes with mortgages. Does anyone know if the rent we receive count towards the income side? Does property tax factor in on the debt side? If so, for all 3 homes? No matter how I run the numbers, I can't get to the ratio that they have. Help pls!!!
If that banker isn't helpful, why not go to two more?
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#6
Quote from tennis4789 View Post :
If that banker isn't helpful, why not go to two more?
Or three more?
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#7
Quote from Metric View Post :
Or three more?
or 4?
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#8
Or any experienced mortgage broker will be able to determine what options you qualify prior to sending the loan package to a lender for Underwriting.
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#9
75% of rental income can be counted toward your income if it's been declared in your taxes for the last two years.
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#10
Quote from sundayline View Post :
75% of rental income can be counted toward your income if it's been declared in your taxes for the last two years.
Rental income does not need to be declared for two years in order to credit. Most recent tax return is fine. Even if not decalred (due to renovation) a valid lease can usually be utilized (as per Fannie Mae current guidelines).

Plus, when departing a primary residence that is going to become an investment property, provide a lease, copy of the security deposit being deposited into your bank account and updated statement showing the deposit check clearing will allow you to utilize 75% of the monthly rental received towards rental income to be included in your dti.
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Last edited by tiedyed1 April 9, 2016 at 09:06 AM
#11
If you have to pay it, yes it will be included in your DTI, unless there are recoveries, etc (meaning the tenant pays the tax liability)- so, yes the taxes are factored in for all three properties, along with the mortgage debt service.
Keep in mind that I have little personal mortgage experience, but I do work for a major commercial bank, on the commercial side of things. There will also likely be reserves for vacancy, and maybe even leasing commissions that are factored in to the analysis.
There are items that can be discussed. Lets just say you have a business and the said business pays your auto expenses, but then boom it appears on your credit report- in this case, make sure they are not double counting this expense (applying it to the real estate entity and also you personally). Thats just one example. I could go on much longer. Make sure you identify one-time expenses. Lets say that on one of those investments, the roof needed to be replaced, or the furnace, etc, and that expense is on the tax return. Let them know that it is not an expense that you will be seeing on an annual basis. they may ask you to furnish supporting documents.
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#12
Quote from tennis4789 View Post :
or 4?
Is it the point, is it not?
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