Higher DTI and could we qualify for a mortgage

[sarahlaila]

Thanks for any help in advance. We wont be buying for another year but just running through numbers and planning. I used a DTI calculator online to come up with the numbers. We currently own a two home and will be renting it. Unfortunatwly we will not have two years of rental history in our Taxes so we will have to include the mortgage to our DTI calculations. We bring in between $110000-$115000 a year and have car loans and personal loans. Fico score for both are between 740-775. The calculated DTI is 25/45 for the amount of house paymebt we are comfortable paying for two homes. Do you think we could still qualify. We have about $4000 in savings and will increase that to $10000 in a year. Also I have $30000 in employer retirement plan that I can take a loan out of and a 403b that will have $6000 atleast that I can take a 50% loan from if needed. Any thoughts would be appreciated. Thank you!

[Walt_K]

I think it's going to depend on more than DTI.  And it will vary from lender to lender.  I've only been through this once, so no expert.  I just bought a house while still carrying my condo and had to have both figured in to my DTI.  I had the condo listed, but it wasn't sold yet and I didn't want to have to put in a conditional offer on a new home, so I was looking to get approved while carrying the condo.  With both mortgages my DTI was 28/35.  We found several lenders that said yes, but there were some lenders that still wouldn't do it because we didn't have a lot of equity in the condo.  Didn't you post that you were underwater on the town home?  That might be an obstacle.     

[webhopper]

I went through this nightmare earlier this year. Even with 4 yrs of rental history it was hard. I was able to finally wade through. My new house was 17 front end ratio. I had to have 6 months PITI in savings for the rental property and 2 months worth of PITI for the new house in savings. The rental ltv was at 90%... so not much equity. If you could possibly pay some of your notes down to less than 10 months remaining you will be doing well.

[sarahlaila]

Yeah we are underwater by $20000. I'm aggressively paying down our debt and then will tackle the mortgage to get it down to market value. Town homes are just not selling but renting has not been an issue. I can work only so many extra shifts and have limited child care. I have been paying all extra money towards our 5 year personal loan to pay it off in 18 mo. That would help dti. But I don't think our home values are going back any time soon. It's been hard deciding then to tackle mortgage or put that money in savings and keep the townhouse as an investment property until values improve. I really want a house with a yard that my young kids can enjoy. What's the point once their preteens lol

[StartingOver10]

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@sarahlaila wrote:
Yeah we are underwater by $20000. I'm aggressively paying down our debt and then will tackle the mortgage to get it down to market value. Town homes are just not selling but renting has not been an issue. I can work only so many extra shifts and have limited child care. I have been paying all extra money towards our 5 year personal loan to pay it off in 18 mo. That would help dti. But I don't think our home values are going back any time soon. It's been hard deciding then to tackle mortgage or put that money in savings and keep the townhouse as an investment property until values improve. I really want a house with a yard that my young kids can enjoy. What's the point once their preteens lol

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The underwriters put you though an extra tough time when you are buying another house and your current residence is underwater.

They do it because of the "buy and bail" potential. In other words, it has happened over the past several years that the homeowner bought something else, rented out the previous property and then did a short sale on the previous property. It happens a lot.

So the underwriter will put you through an extra tough process because they want to make sure (in their limited capacity) that you aren't going to dump the current property in which you currently reside in a short sale later. Some of the underwriters will require equity in your current property. That is the issue you face. Since you know it early on, you might want to make sure there is at least some equity if possible for you. I know its challenging in this market.

[sarahlaila]

I can their concern and its one reason Im tryin to make sure I have 6 months of PITI reserves. I could pay both mortgages with my income but it definitely make us tight on our budget. Argh I need to talk to an honest lender near me. If I should put all money towards mortgage instead of personal loan first then I would.
We have worked hard for our credit and buying and bailing would not be an option but banks don't know that. Feel like there was a window of opportunity a few years back and we missed it.