All Forum Posts by: Frandizon John Reyes

It’s pretty simple as others have said. The formula is (debt/gross W2 income + 70-80% of gross rental income) OR (debt/taxable income) whichever is less. So it doesn’t matter if 75% of your gross rents plus your W2 income adds up to $120k/yr and you only have $1k/mo in debt if your itemized deductions reduce your taxable income to $20k/yr. In the bank’s eyes you only make $20k/yr and likely don’t qualify for that $500k loan.

Thank you. This is what i need. The 70-80% part does hurt me a bit. It's tough to maintain a decent DTI

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Originally posted by @Brie Schmidt:

@Frandizon John Reyes - They use what is reported on your taxes, see below, unless you just bought it they use 75% of gross rents mius PITI

Net Rent Calculator
Property Address:
Rents received (Line 3b)
- Total Expenses (Line 20)
+ Depreciation (Line 18)
+ Insurance (Line 9)
+ Interest (Line 12)
+ Taxes (Line 16)
+ Eligible Other Expenses (Line 19)
= Gross Yearly Rental Income
/ by 12 = Gross Monthly Income
- PITIA
=Net Rental Income(Loss)

I apologize for taking so long to respond. What form can i find this information? is this all on the schedule E?

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Originally posted by @Cameron Tope:

@Derek Harris is correct - most banks will take a percentage of gross rents (70-80%) assuming that 20-30% of gross rents will be used for expenses.

Therefore your rent income to offset your DTI would be between $4,900 to $5,600 ($7,000 x 70-80%). To some banks you would have a negative cash flow.

Hope that helps!

Ouch! I do however, have a decent W2 income to offset the high mortgages. Im trying to start off with a refinance to get a lower interest rate and thus lower monthly payment by removing PMI. Im hoping with the refinance i will have a low enough dti to try to buy again.

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Originally posted by @Timothy Hero:

If you work with PML's, they don't look at your DTI or income. :)

Not to sound like a noob, but how do i go about finding PMLs?

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Originally posted by @Derek Harris:

Originally posted by @Frandizon John Reyes:

How do you calculate debt to income ratio when you have rental property? Are we using gross rental incomes or net? I own two 3-unit buildings in the Chicago area and live in one of the units. Total gross rental income is $7,000/month. Mortgage for the two buildings are $2,450/month and $2,750/month for a total combined mortgage of $5,200/month between the two. My net rental income is $1,800/month. Are we using the $7,000 gross rental income number for the denominator in dti calculation or the $1,800 net income number. Any help would be appreciated.

Frandizon, my recommendation is to talk to the lender and ask how they calculate it. Not all of them calculate it the same way. Many lenders only calculate a fraction of the rental income (i.e. 75%).

Oh i see. Absolutely. I will find out what my specific lender uses. Thank you.

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All Forum Posts by: Frandizon John Reyes

Frandizon John Reyes has started 1 posts and replied 6 times.

Post: Debt to income ratio when you have rental properties

Post: Debt to income ratio when you have rental properties

Post: Debt to income ratio when you have rental properties

Post: Debt to income ratio when you have rental properties

Post: Debt to income ratio when you have rental properties

Post: Debt to income ratio when you have rental properties