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Opinions: Is a 42% DTI ratio too much for a rental property investment?

Established Contributor

Re: Opinions: Is a 42% DTI ratio too much for a rental property investment?

there's no PMI on investment loans and to have the rental income considered for the loan, i think most lenders want to see 2 years of rental income/experience.

Message 11 of 17
New Contributor

Re: Opinions: Is a 42% DTI ratio too much for a rental property investment?


@wa3morewrote:

there's no PMI on investment loans and to have the rental income considered for the loan, i think most lenders want to see 2 years of rental income/experience.


The PMI part is simply not true. It is true to the extent that most conventional investment mortgages require 20% down, so naturally they have no PMI. But youre not getting any mortgage under 20% down, investment or non investment, without a PMI. 

Message 12 of 17
Regular Contributor

Re: Opinions: Is a 42% DTI ratio too much for a rental property investment?

Yes that is true, no pmi since 20% is required.

Some will want 30% down

 

So I was shifty with my wording as to put down less than 20% 

would require as a primary/vacation home without renting it out.

 

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Message 13 of 17
Established Contributor

Re: Opinions: Is a 42% DTI ratio too much for a rental property investment?

yes, my statement that there is not PMI insurance with less 20% is incorrect . I agree , most want 30% down. 

Message 14 of 17

Re: Opinions: Is a 42% DTI ratio too much for a rental property investment?

DTI is not your issue, you are fine.

However, you will need to put down 20%. You should be able to borrower against your 401k, but you may be hit with penalties + taxes.

Most lenders (including myself) are able to use 75% of the rent as income if you can provide a lease and proof of the tenant’s security deposit before closing - thus reducing you DTI ratio.
Message 15 of 17
Frequent Contributor

Re: Opinions: Is a 42% DTI ratio too much for a rental property investment?

Maybe perhaps you could get a cheaper lease, a big chunk of your money is going to a vehicle that could be going to a house payment.

Message 16 of 17
Valued Contributor

Re: Opinions: Is a 42% DTI ratio too much for a rental property investment?


@cjane1wrote:

Maybe perhaps you could get a cheaper lease, a big chunk of your money is going to a vehicle that could be going to a house payment.


I could eventually get a cheaper car, or even lower my monthly payment by financing something else over 6 years instead of leasing something really nice for three years. However, I just signed this lease less than two months ago, and am not in a position to end it anytime soon. My income is increasing ~10% this year as well, bringing my DTI even further down. 




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Message 17 of 17