How to Calculate Debt to Income Ratio with Rental Property

[Alex Scotte]

I have a rental property which nets only $200/month when factoring loan and property taxes. How would I calculate my debt to income ratio?

Option A

DTI = (Mortgage + Car Loan) / (Wages from Job + $200 from Rental)

Option B

DTI = (Mortgage + Car Loan + Rental Property Loan) / (Wages from Job + Rental Property Income)

[Scott Passman]

@Alex Scotte To calculate your DTI it would be more in line with the following:

DTI= (Mortgage + auto loan + rental mortgage + minimum credit card payment) / (W2 income + (rental income x .75)).

You will only get credit for ~75% of your rental income when calculating DTI. Don't forget that mortgage includes principle, interest, taxes, and insurance (PITI). So if 75% of your rental income comes out to more than the mortgage then it goes on the income side, but if 75% of the rental income is less than the mortgage it could add to the debt side which would change the equation above a little. Hope that helps.