DTI: Rent by room income on schdule E

[Michael Shea]

I'm contemplating renting out an investment property(non-primary residence) on a room-by-room basis with separate longer-term leases for each bedroom. I'm curious if the income from these rentals, listed on Schedule E, will be factored into my Debt-to-Income (DTI) ratio. My understanding is that when renting out rooms in a primary residence, the income is classified as boarder income and isn't counted towards DTI, as outlined in Fannie Mae's guidelines(https://selling-guide.fanniemae.com/Underwriting-Borrowers/I...). However, since this property isn't my primary residence, I'm unsure if the same rule applies.

[Jeff White]

@Michael Shea I'm not a tax accountant, but I've done the rent by room strategy for over 6 years as a house hacker, and I've recognized rent by room tenants rents in the Schedule E part of the tax return. The border income that you listed is only required when purchasing a primary residence, you can't use the roommate tenants , even with existing leases to help qualify for the mortgage.

If you are buying it as a investment property, you just need to record it on your tax return for 2024 tax return and in 2025, when you file your taxes, you will be able to count it positively for your debt to income ratio.