How is DTI actually calculated?

[Joshua Hollandsworth]

I always thought counting rental income was pretty simple. Someone told me today that I'm actually running my numbers incorrectly.

Here's How I have honestly always believed DTI ratios are calculated while including rental income.

Joe makes $5k/month at his job.

Joe has 2 rental properties that rent for $1k each. Both properties combined cost $1k in PITI every month.

Joe's going to buy a primary that costs him $500/month with no other debt.

The bank will count $750 for each rental, which puts him at $6500/Month in income.

His debts are $1500/month. Then they run the equation.

My friend told me today that they add Net rental income on top of other income, and they don't include the mortgages on rentals against your DTI, unless there is negative cash flow. This can't be true, right?