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Debt To Income Ratio Calculation Investment Property

Hi, I understand how Debt to Income ratios are calculated normally, but what is factored in when considering an investment property that you own? I've read that you take 75% of the gross rent (as stated on the tax return and have owned for 2+ years) minus the PITI. What if the mortgage is an ARM, what PITI does the bank use in that case? The original rate was about 7% while the current rate is just 3%, so it makes a big difference in this case. by danns_943_307 from Great Falls, Minnesota. Aug 9th 2011 Reply


Tom Stevens (Thomas.Stevens)
#21 ranked lender in Massachusetts - 68 contributions

The PITI is based on the "qualifying rate" which depends upon the type of ARM you have. Your mortgage lender can tell you what that is. For a 5 year or greater ARM it's typically the note rate.

Aug 9th 2011
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Joe Metzler (JoeMetzler)
#1 ranked lender in Minnesota - 3,895 contributions

Debt-to-income on an investment home? Under the OLD RULES, we simply gave you credit for 75% of the rent received. Under the CURRENT RULES, AND the home is on your tax returns, it is gross rent minus write-offs, then minus YOUR payment on the property. So here is an example: Say the rent is $1000 a month, and you have $3000 worth or write offs on the home for the year (repairs, etc). $3000 divided by 12 is $250 a month. Now take the $1000 rent, minus $250, and your actual rent is $750. Now lets assume YOUR mortgage payment is $500 a month on the home. $750 rent collected - $500 mortgage payment = $250 of rent (income) is added to your income. Joe Metzler, MLO, NMLS #274132. 651-552-3681 www.MortgagesUnlimited.biz

Aug 9th 2011
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