Rental Mort DTI Clarification ?

5 Replies

Hey Guys. Total newbie here, go easy on me. :) My husband and I are planning on buying our first Rental Property in the next 12 months and I mostly just want to make sure we have all our ducks in a row. I'll keep this short and just ask the questions for now.

Will the lender take into account the anticipated income of the property (even if it's our first rental)? I've read a few mixed things on that. 

On our primary residence mortgage do we include taxes and insurance as part of our DTI? What about taxes and insurance on our investment property?

Does a 401k loan impact the DTI since it is not reported on your credit report? We don't currently have one... just a thought.

Thanks a bunch! 

Unfortunately it mostly depends on the lender. Fannie Mae and Freddie Mac set standards but a lot of lenders have overlays that are more restrictive so you have to shop around. Or use a mortgage broker to shop around for you. Just make sure they know what they are talking about and can deliver what they promise.

In terms of the 401k loan I honestly don't know because I have never done one. A margin loan from a brokerage account does not count against you because you can always sell the assets to cover the loan and stop the payments. I would imagine a 401k loan is different because you cannot cover so easily. But maybe not since you could cover if you were willing to pay the taxes and fees. I know that is a lot of talk just to say i don't know but hopefully it will give you some ideas of questions to ask.

@Edward B. has it right above, @Alicia LaPointe . Fannie will allow the inclusion of rental income on a new property for new landlords, but many lenders have overlays. 

A 401k loan will not be included in your DTI because it's a loan to you from you.

Thanks for the info! That definitely helps. 

@Alicia LaPointe To answer your other question, yes, the taxes and insurance are included as part of the total housing payment that is counted in your DTI. On your investment property the taxes insurance are also figured into your net rental income or loss for that property, which is then factored into your DTI.

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