Hi all,

Im in the 11th hour trying to close a deal on a primary res for myself. 800+ credit score, approved for conventional first mortgage no problem, but just fouund out there is a hangup on the 2nd mortgage. I have had rentals for ~5 years, but added a few new ones late last year. Did some renos, but did not get them rented until this year. 2017 taxes show a loss on these properties, even though they are rented now for a great profit.

The lenders I have been speaking with refuse to factor in the income from the leases and thus have my dti way out of line. Does anyone know of a lender that they would recommend in sc that may actually use common sense when lending?

Lenders are sometimes crazy. They discount 25% of the income on rentals because of "Vacancy and Repairs". Also they sometimes won't count "retirement" accounts because they can't put a lien on them.

Robert J's statement that lenders are crazy confuses me. Considering that the industry average is that 40-50% of rents go to expenses, I think they're generous for only reducing income by 25%. And of course they aren't going to count retirement. I don't count judgment proof income either. Seems wise. Maybe he means they're crazy for giving such a good break to potential borrowers.

Anyway, you may have heard the old saying, "The borrower is slave to the lender." This is one of those times when you gotta play by their rules. So if they say "No" then I see two options:

1) Get on the line with your local REIA and see who the loosest lenders are. Due to the time and flexibility requirements, you might have to do a hard-money loan that will be more expensive and use that to cover your second, then do a refi with a traditional lender to pay them off in 2019 once you have the accurate tax filings for 2018 showing all of your income.

2) Would your current lender accept a statement prepared for and certified by your CPA that the rents and expenses are legitimate based on 2018 numbers? Maybe along with bank statements to show the income?

I used to instruct mortgage specialists on how to count investment income and we had many arguments.

When it comes to reporting income, lenders hate ups and downs. They want stability, because they want you to make payments thru the life of the loan.

However, I'm surprised they ignored your current rent income.

When I was accelerating my payments (by adding large amounts to the principal payments), they panicked and swamped me with refi offers.

FRed, that is very interesting. How much more were you adding to the payment in percentages?

Owner-occupied loans require a lot of paperwork.

Robert J, I agree, sometimes common sense is lacking. Having paid off properties and retirement funds shows financial responsibility.

I had a lender once refuse to count the income from any property that had a month to month lease.

Never mind that the same tenants had been there for years and years and I could show all the income. They only counted the ones that were under their first one year lease. All mine convert to month to month after the first year.

When I couldn't get the local national bank to give me a reasonable loan and LOC I went to a local credit union. I got two lines on two properties...no problem.