Applying 75% of rental income to debt to incomr

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Applying 75% of rental income to debt to incomr

Horacio Gutierrez
Rental Property Investor · Downey, CA · Member since 2017 · 347 posts · 25 votes

Hello,

If you buy you first rental property with a conventional loan can use the estimated rental income to use that 75% income to.use for the debt to income ratio ratio. Also I have never had landlord experience but I do my primary residence.

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Eric James
Investor · Malakoff, TX · Member since 2017 · 2k+ posts · 2k+ votes
5y

Banks will commonly not count rent income until you have a couple years experience.

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  • Eric James
    Investor · Malakoff, TX · Member since 2017 · 2k+ posts · 2k+ votes
    5y

    Banks will commonly not count rent income until you have a couple years experience.

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  • Peter M.
    Rental Property Investor · DFW, TX · Member since 2013 · 953 posts · 910 votes
    5y

    @Horacio Gutierrez Yes that is correct. You could also set an LLC up as a partnership which gives you a K-1. 100% of the K-1 income will count towards DTI for future loans.

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  • Horacio Gutierrez
    OP
    Rental Property Investor · Downey, CA · Member since 2017 · 347 posts · 25 votes
    5y

    What if I have already my own primary residence, I read that would help if you didn't have landlord experience?

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  • Eric James
    Investor · Malakoff, TX · Member since 2017 · 2k+ posts · 2k+ votes
    5y
    Originally posted by @Horacio Gutierrez:

    What if I have already my own primary residence, I read that would help if you didn't have landlord experience?

    To count rental income they want to know you can actually do this. Not that you can be a homeowner. 

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  • Alecia LovelessPro Member
    Member since 2019 · 3k+ posts · 2k+ votes
    5y

    @Horacio Gutierrez For counting rental income toward debt to income ratio can vary by bank. I bought a multi family and using the leases the bank counted some portion of the income after factoring in the new mortgage payment and a bit for reserves toward my debt to income.

    I am in the process of purchasing a second multi family through the same small bank which is where I have banked for 25 years and they are once again using a portion of the rents from the leases at the new building to calculate my new debt to income ratio.

    This bank services their own loans and does not sell them. So they are pretty conservative.

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