How to use rental income to qualify for new mortgage

[Janee Gibson]

Hello,

I currently rent out a single family home (15 months so far) for $1250 per month and I live with my fiance rent free. I am looking to purchase another single family house to use as my primary residence. Currently my mortgage payment on the house I rent is $700 (PITI) which means I make a profit of $550 per month. How do I qualify for a new mortgage? I make 2,500 per month gross from my job. I am trying to figure out how to calculate the DTI using my rental property. My only debt is $220 student loan payment and the $700 mortgage payment.
If I use 75 percent of the rental income that is $937 (1250x75%) minus the 700 mortgage payment, is a profit of $237. Is that added to my 2500 work income?
The total PITI mortgage of the house I want to buy is $850 per month. I am trying to understand if I Would I qualify for this home?

From my calculations I would add the $237 net profit from the rental income to my 2500 work income for a total monthly income of $2737. Then I would add the mortgage of the house I want to purchase (850) plus my student loan debt of $220 together for a total of $1070. I would then divide the $1070 by my monthly income of $2737 which equals 39% DTI which means I should qualify since it is less that 43%. Is this math done correctly?

Thank you for your time,

Janee Gibson

[Elise Marquette]

Lenders will count the rental income, even if you have not had the property for two years. If you have filed taxes on the property, we look at the net rental income and then subtract out the PITI. If you have not filed taxes with the property yet, then lender use 75% of the lease.

Why not just speak with a lender to figure out if you'll qualify or not rather than trying to calculate your DTI on your own? You'll have to talk with a lender at some point so may as well eat the frog rather than spend all day trying to figure out your numbers when the lender is just going to do it anyway