All Forum Posts by: Randy P.

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Table 6: High LTV Refinance Mortgage Loans

If the sum of all applicable LLPAs exceeds the caps listed below, the excess will be waived at delivery.

Does this mean that there is a cap of 2% on LLPAs for 80%-90% and ? Wouldn't it be better to get a higher LTV if the LLPA since there is a cap are going to be lower?

That seems high to me, I'm also in the market for a similar loan and my rates are about 3.75% although it comes with almost 2.5 points. 

My fault for not being clear since there are 2 properties involved. My old rental has a current mortgage on it, and is on my schE. The new home I am going to purchase is going to be a rental, and I want to take out a mortgage to purchase it. The extra income is from the new rental purchase expected income which is around $5000 a month but only 75% counts so it would be an extra $3750 added to both debts.

W-2 Income : $6,250

Old Rental Income : $4000 (Which would be $3000 since it is 75%)

Old Rental Mortgage(PITI) : $3000

Old Rental Expenses : $500

New Rental Income : $5000(Which would be $3750 since it is 75%)

New Rental Mortgage(PITI) : $3500

Using my calculations, it would be 

$4,000($3500 NR PITI + $500 ScheE losses)/

$10,000($6250 W2 + $3750 NR Income)

= 40% DTI

Using their calculations it would be 

$7,500($3500 NR PITI + $3000 Old Rental PITI + $500 Old Rental Expense)

/$13,000($6250 W2 + $3750 NR Income + $3000 Old Rental Income)

= 57.7% DTI

I understand the 75% part and I just forgot to at it to the first part but it doesn't change my question, its fine if I am net negative by a bit and they add that to my liabilities since it will only be $500 added to the liabilities. If they do 75% income less expenses that would still be a net number. Instead they are adding both the liabilities to the debt and rental income to my income. By adding the PITI of my current mortgage on my rental, it makes it so its almost impossible for me to get a loan because it skews the DTI a lot.

Redid the numbers but only using 75% income from my current rental yields.

Using my calculations, it would be $4,000/$10,000 = 40% DTI

Using their calculations it would be $7,500/$13,000 = 57.7% DTI

As someone else has already answered, they should be using the net then adding that to my liabilities/debt, not adding both numbers.

I am not far along the process at all as I have not yet found a property to buy yet. I was just getting all my financing in line to get an estimate of what my actual budget would be.

Thanks Chris for answering my question, I will be going back to my lender with this information and see what they say.

My numbers were just rounded off examples to show I have about a $500 net rental Income use the spreadsheet in this thread.

https://www.biggerpockets.com/forums/49/topics/306671-how-does-a-rental-property-affect-your-debt-to-income-ratio

My question mainly is, shouldn't they just be adding my net rental income to my income portion of DTI? Instead they seem to be adding 75% of my rental income as income and adding my PITI to my debt portion. The way they calculate it makes my DTI way higher.

Is this because I only have one year of full schedule E from 2019. My 2018 only has 2 months of rental and shows a huge loss because of all the time during rehab.

I am planning to buy a new rental property with a new mortgage(Conventional 30 year) but was wondering how my old rental property counts in my DTI because I believe my lender is calculating it incorrectly. I currently work a day job and earn around $75,000 W-2 Income per year. I own a duplex that has a mortgage on it and is fully rented out(I do not live in either unit) that was purchased in August of 2018. Income from the property per month is about $4000 gross, $3000 goes to Mortgage(PITI) and about $500 misc expenses things netting me around $500 a month. This rental income reflects on my 2019 schedule E.

Monthly Income

W-2 Income : $6,250

Old Rental Income : $4000

Old Rental Mortgage(PITI) : $3000

Old Rental Expenses : $500

The new property I am looking at would cost about $700,000, of which $500,000 would be financed. The way I understanding it, my current DTI should be 0% since my income from my old property completely covers my PITI for itself and expenses. The calculation should be $0/$6750, since $6250(W2)+$500(net rental income). My lender is calculating it differently by adding my W2 income to my rental income, $6250+$4000 for my income and putting my PITI and expenses and debt, so $3500/$10250. When applying for the new loan the PITI would be $3,500 and calculated rent would be $3750($5000*0.75).

Using my calculations, it would be $3,500/$10,500 = 33% DTI

Using their calculations it would be $7,500/$14,000 = 54% DTI

Which calculation would be the correct method? Thanks in advance.