How Do Rentals Affect DTI?

[Brandon G.]

So when trying to get a new loan, I know lenders want to see the applicant's debt to income ratio below a certain figure. I am curious how rental income is calculated in the eyes of the lender and how that plays into the DTI.

For example, I know a rental with positive cash flow can report as a loss for tax purposes due to depreciation. Do lenders use the tax statements (which may be showing a negative income) when calculating DTI or do they use other means?