I've seen a lot of discussion around this, but most of the info was from 5+ years ago and the answers were all over the board so I hope someone can guide me in the right direction (a referral to a lender licensed in Louisiana who knows how to handle this would be amazing).

Long story short, I want to buy more rental property but I'm going to hit the DTI limit soon if I can't find a lender to calculate the numbers favorably. I've got great credit and can handle the required down payment (and 6 months reserves if necessary), but what I'm running into is lenders calculating DTI for rental properties just like they would calculate the debt for a 2nd home or a vacation home.

I've read quite a few Q&A's here that basically say, "as long as 75% of the rental income will cover the mortgage then it's essentially a 'wash' and should not increase your DTI." First of all, is that true? If so, is that only true for new purchases or is that how you'd calculate DTI for existing rentals as well?

For example, I've got a single-family rental that I've owned for 3 years now, so it's reflected on my schedule E (along with the depreciation and other deductions that come with it). When calculating DTI would we look at the schedule E to figure income and then add the monthly note to my debt or would that property be looked at separately (as long as 75% of rent covers the note it's a wash)?

I've also read where some lenders will use the schedule E income but add deductions like depreciation, taxes, insurance, etc. back into your income since it's directly related to the property. That's not as favorable as looking at each property individually to see if 75% of rent covers the note, but it definitely helps on the income side of the equation.

How this is calculated will make a huge difference in the amount of property I can buy. If I just need 75% of rent to cover the note, then I can buy property as long as I've got the down payment. If each property is going to increase my DTI, then I'll be very restricted.

Keep in mind that I'm trying to do this with a 30 year Freddie/Fannie loan rather than a commercial loan. I've talked to some great commercial lenders who seem to know all the tricks, but in order for this to make sense I need the longer term and lower interest rate that comes with a Freddie/Fannie loan. It seems that most of the Freddie/Fannie lenders have great "primary residence" knowledge but are limited when it comes to investment properties.

Shreveport, Louisiana

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