Is rental income counted toward DTI?

[Mel Adams]

Hi all - I'm looking to purchase my first investment property using a conventional loan. My current DTI is <40% and I have excellent credit so I don't foresee any issues qualifying (someone please tell me if I'm wrong on that, lol). However, looking ahead, I plan to BRRRR the property and refinance after 6 months. With the new property's PITI added to my debt, I'd be hovering really closely to 50% DTI and may exceed it depending on exact numbers.

So, can rental income from the property I'd be refinancing be counted towards my gross monthly income to offset the PITI? I've read lenders will let you apply 75% of your gross rent, and add (hopefully) the difference to your monthly income?

I've spent the last hour reading different posts and articles, but saw some contradicting answers so I thought I'd ask myself. Hopefully this is in the right forum. Thanks for your time! 

[Jeff Shumway]

In most cases, yes you can use 75% of the anticipated rental income from the property you're buying. The only exception we see is if you do not have a primary housing expense (i.e. living rent free with family). So long as you have either a rent or mortgage expense you should be fine. This is for a conventional loan.

As Nick mentioned, you can also look at a DSCR loan. This is based solely off the anticipated income from the property you're buying. You could be unemployed and still qualify for a DSCR loan so long as the anticipated rental income meets or exceeds the monthly mortgage payment. (There are even programs where the mortgage payment can be greater than the rental income and you can still get approved.) DSCR programs are much less paperwork and tend to close more quickly than conventional loans. You can also close DSCR loans in a business entity rather than your personal name and rates have been pretty comparable to conventional financing lately.