How will lenders view the mortgage on my 1st house when trying to by my 2nd house?

[Easton Hill]

Hi Folks, 

I am looking to move out of my first house and convert it into a rental and purchase a new home in a new city were I will be moving for a new project. 

House#1(Current residence): Value - $350-380 w/ 230k in a FHA loan at 3.5% = ~$1350 PITI + HOA with water,sewer,trash being $200 or less. Rents in the area are $2000-$2200

Additionally we have saved up 6 months of monthly rental expenses in a "rental fund" to get us over any vacancies and unexpected issues (~ $9300) and plan on adding a $300 monthly maintenance reserve from the rental income to the fund on an indefinite basis. 

I feel comfortable saying that it will cash flow between $200-400 a month. 

Now this is all hypothetical as I don't have a renter in place yet and still live in the home. 

The plan is to move to the new city, rent a temporary place, start the job, rent the old house and begin looking for a house to either build or buy. 

So my question is how will a lender look at my first house assuming that we have it rented? Will they include my first mortgage in my Debt-to-income ratio? Will they count the $200-400 a month as personal income? 

[Matt Devincenzo]

You'll get conflicting answers from posters, and may even get lenders/brokers who will count this incorrectly...you can see posts here on BP over the years where that is exactly what happens often. Fortunately the only thing that actually matters is the underwriting guidelines. Which you can find here:https://selling-guide.fanniemae.com/Selling-Guide/Originatio...

You'll notice ALL of the scenarios except if you have no housing expense, you are able to take your rents and subtract the PITI/expenses directly from the rent. Then the resulting income or loss can be added your gross income/expenses which is where the DTI is calculated...if they add the rent to your income and the debt to your expenses they are calculating it incorrectly and doing your DTI a disservice.

It sounds like you will likely fall into either one of two 'buckets'. One is they only allow it to offset the PITI/expense and then any residual income cannot be added to your gross income. The other is that any residual positive rental income is added to your gross, which would allow you to reduce your DTI in your new home qualification.