DTI and rental mortgage/income

skymaga · ‎02-08-2015

I have a question about DTI and income as it relates to a rental property.

We currently live in a home that we would like to rent out and move into a new home. When calculating DTI, if we factor in the mortgage on the rental and the mortgage on a new home without calculating the income that the rental will bring, we are well over 50% DTI.

I think I read somewhere that if you have a certain percentage of the mortgage paid down, then you can use future rental income when calculating DTI as long as you can show a lease that the place will be rented out. Does anyone have any information on that?

Thank you in advance.

frugalQ · ‎02-08-2015

If you have 30% equity in your home and plan to convert it into a rental when you close on your new home, you can count 75% of the rental income to offset the mortgage.

We converted our home into a rental back in July of 2014. In our case, I was not sure if we could count the income, but we got an approved eligible in DU, and the only documentation needed was copy of lease and security deposit.

We are able to count the income without having to file our 2014 taxes and without 30% equity in the house. My LO stated that since the house has been rented out for more than 6 months, the lease is all that's required.

We got our conditions back, and other than proof of security deposit, nothing has been said about it.

Anonymous · ‎02-08-2015

Have ya gotta have it rented out to go that route?

I might rent my current home if it doesn't sell before closing. (what its looking like). The house is paid for so I got the 30%.

With no mortgage all that is factored is insurance and taxes (combined is only 1000 a year.) so no DTI issues, but the income might be handy to show them.

Can I say, "look here, I'm gonna rent this house out after I move in the new, what do I need?"