Needing some mortgage advice. We just sold our first rental property and are doing a 1031 exchange into two properties. We are running into a potential issue with our debt/income ratio, even though I have zero debt. The problem is that lenders count military base housing rent price toward my total debt to income, and living in Oceanside, CA with $3200 monthly base housing leaves only about $1600 available to service other debts (aka, the new properties). To explain how the housing process works, I receive a tax-free housing allowance that goes 100% straight back to base housing - I never see the money other than a notation on my paycheck.
That means we max out at about $250k worth of properties if we put down 25% at current mortgage rates. We’re under contract on a $140k property right now (in Norman, OK), which would only leave $100-110k …not ideal. The lenders can count rental income from the property, but we close on the first property in early May, and must identify the second property by April 20th to stay in bounds on the 1031 exchange, therefore we won’t be able to get the first house leased before going under contract on the second to count that income.
Any advice on how to proceed? Need some creative ideas, especially on how to maneuver my debt to income ratio in this situation. Not looking to take out mega millions, but we’re looking for properties in the $120-150k range.
Does this make sense?