Debt Ratio Calculation
Hi Everyone:
I have 10 SFR of which 9 are rentals. All rentals were bought during the past about 18 months. Last year I got them updated and later rented out. This year will be almost full rental income. Now I am having trouble with getting more mortgages becuse of my high debt ratio; I made 20 % down paymen in all cases.
A lot of credit inquiries have brought down my credit rating from 801 down to 651 without any default on my part. Any advice will be welcome as how can I keep the ball rolling by getting more mortgages ?
sayana 
[ Edited by sayana on Date 07/14/2004 ]
I'd assume your including your rent as income, right? I'm also going to assume your using conventional financing right now?
You can always go with an unconventional financing source with no ratios. Do you usually go through a bank or through a mortgage broker? A mortgage broker would be more help in your situtation (IMHO).
Also, start buying those properties owner financed!
I have heard also that there is a maximum number of mortgages that a single person can own. You might want to look into this requirement as you proceed with your investing.
Have you looked into assumable loans (subject-to?).
All the best!!!
JS.
Quote:
On 2004-07-14 18:54, smithj2 wrote:
I have heard also that there is a maximum number of mortgages that a single person can own.
You heard wrong!
Fannine May limits you to 10. When you hit that number you need to go to a portfolio lender. OR wrap some of the mortgages into a commercial loan.
Quote:
On 2004-07-14 18:25, sayana wrote:
A lot of credit inquiries have brought down my credit rating from 801 down to 651 without any default on my part.
Inquiries have dinged you but what has really lowered your score is all of the new debt. The longer you have these loans then they will help.
As for the debt ratio. You may want to slow down and only buy when you can have positive cash flow when you count 75% of the rent.
when they do the analysis, they will look at tax returns. Being that you have only owned for 18 months, I would think that you may have run into difficulty. When you have 2 years of tax returns, they will add back in depreciation and interest expense. They will look for the global cash flow, as the business income (assuming that you are 100% owner) will pass thru to you.
the ways around this, is to owner finance, and with time, you credit score will increase. depending on when the credit inquiries were, is how much they will lower your score. For instance, if you had 3 companies look at your credit, within the last 6 months, it will be lower than if you had those same 3 inquiries over a one year period of time.
Subject to is really the best way to go- you own the property and someone else has the mortgage. You build someone else's credit (while paying on time) and you don't get hit with the cash outflow. (John Locke has a GREAT book on the subject)
If you need to get a mortgage, employment verification may work, or as stated above a no doc program would work.
good luck