woodburyowner
Well-known member
Assuming that there is >25% equity in the rental property, how is rental income calculated for DTI purposes?
How is rental income calculated for DTI purposes
- Thread starter woodburyowner
- Start date
NEW -> Contingent Buyer Assistance Program
irvinehomeowner
Well-known member
I recall someone (a lender?) telling me that only 50% of that rental income (after expenses) is used for DTI.
usctrojancpa
Well-known member
From my experience in obtaining a loan, they take your rental income from your tax returns and multiple it by 75% to get the income side and then take the actual expenses. The net income or expense is then either added as additional income or added as additional monthly expenses when they compute your DTI. If you don't have a tax return that shows your rental property because you've rented it recently, they'll take 75% of the rent amount that you've received in the past 3-6 months.
irvinehomeowner
Well-known member
USC's 75% number sounds more correct and makes more sense... paging SGIP!! (I wonder why there aren't more people in the mortgage biz on this forum 
)
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sgip
Well-known member
For purchases transactions it's 30% equity, not 25.
If your buying another home, renting your departure residence, and have 30% equity, verified by either an Automated Value Model (AVM) or an appraisal, a valid lease, verified by an appraiser to be at a market rental rate, plus a deposit check for the rental of the property deposited into your account, the rental income for the departure residence can be used as qualifying income. Some lender's guidelines ask for 6 months PITI HOA in cash reserves. Other's won't use the income at all if you've never been a property manager.
If it's a refinance transaction, you don't have to have equity in the property. If the rental income is "new" - not reported on your returns - X number of cancelled checks and a 25% vacancy/expense deduction is used. ($1,000 rent x .75 = $750 effective rent)
If it's pre-existing rent (purchase OR refinance transaction) the data from the tax return is used to net down to effective qualifying income.
My .02c
Soylent Green Is People.
If your buying another home, renting your departure residence, and have 30% equity, verified by either an Automated Value Model (AVM) or an appraisal, a valid lease, verified by an appraiser to be at a market rental rate, plus a deposit check for the rental of the property deposited into your account, the rental income for the departure residence can be used as qualifying income. Some lender's guidelines ask for 6 months PITI HOA in cash reserves. Other's won't use the income at all if you've never been a property manager.
If it's a refinance transaction, you don't have to have equity in the property. If the rental income is "new" - not reported on your returns - X number of cancelled checks and a 25% vacancy/expense deduction is used. ($1,000 rent x .75 = $750 effective rent)
If it's pre-existing rent (purchase OR refinance transaction) the data from the tax return is used to net down to effective qualifying income.
My .02c
Soylent Green Is People.
