Calculating DTI on Rental Mortgages

[Will Johnston]

I've found different lenders calculate DTI ratio when it comes to rental income differently.

Some lenders take rental income (or a percentage thereof), subtract the mortgage amount, and then add the result to either the debt or the income.

Others add the rental income (or a percentage thereof) to income and the monthly mortgage payment to debt.

So, let's say a place rents for $4000, the mortgage is $2000, I make $5000/month, and I've got other debt of $2500/month.

So, my DTI without the rental is 50%.

Under the first scenario, . Adding the additional mortgage makes my DTI 35.7%. (2500 debt/(5000 income + 4000 rental income - 2000 rental mortgage)) In other words, I easily qualify for the mortgage.

Under the second scenario, adding the additional mortgage doesn't change my DTI from 50%, and I wouldn't qualify. ((2500 debt + 2000 rental mortgage)/(5000 income + 4000 rental income))

So, two questions:

Is there some name for these different ways of calculating DTI such that I can easily reference them and ask lenders?

Does anyone know of any low-cost lenders that calculate DTI the first way? Maybe one of the CostCo lenders? I refinanced a place using a lender that calculates it the second way and barely qualified for the mortgage because of my DTI.