Calculating DTI for owner-occupied multi-family properties?

[Paul Lee]

Hey guys,

I currently owner occupy a 4-unit multi-family and I'm looking to purchase and occupy another 4-unit multi-family. I'm using Fannie Mae selling guidelines to calculate my DTI, but I'm still not sure if I am calculating it correctly. I have one year of rental income history as a landlord. I would be GREATLY appreciative if any knowledgeable investors/lenders could help me with the bold questions below regarding the calculation.

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Total Debt:

• New 4-unit property mortgage
• Do I include the mortgage for my current owner-occupied property if I plan to rent out my unit and the total rental income for all four units would exceed my current property mortgage? I have read that if the rental income for property exceeds the mortgage, you would just net the positive difference towards income. Not sure if that's the case for owner-occupied properties.

Income:

• Two years of my W2 + Bonus income
• 75% of the new 4-unit property mortgage
• Would I add the rental income for my owner-occupied property if I intend to rent my unit out and the combined rental income would exceed the mortgage (see above)?

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For reference, I looked at:

Rental Income Calculation Worksheets

Fannie Mae publishes four worksheets that lenders may use to calculate rental income. Use of these worksheets is optional. The worksheets are:

• Rental Income Worksheet – Principal Residence, 2– to 4–unit Property (Form 1037),
• Rental Income Worksheet – Individual Rental Income from Investment Property(s) (up to 4 properties) (Form 1038),
• Rental Income Worksheet – Individual Rental Income from Investment Property(s) (up to 10 properties) (Form 1038A), and
• Rental Income Worksheet – Business Rental Income from Investment Property(s) (Form 1039).

https://selling-guide.fanniemae.com/Selling-Guide/Origination-thru-Closing/Subpart-B3-Underwriting-Borrowers/Chapter-B3-3-Income-Assessment/Section-B3-3-1-Employment-and-Other-Sources-of-Income/1032995141/B3-3-1-08-Rental-Income-06-03-2020.htm