Airbnb Income for DTI and DTI double counting

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Airbnb Income for DTI and DTI double counting

Ezra Benjamin Harris
Investor · Orlando, FL · Member since 2020 · 17 posts · 3 votes

I have a condo in Florida I use for Airbnb. It was down most of 2023 due to Hurricane Ian in 2022. I had a tax return loss of 21k including all expenses PITI+HOA in 2023. In 2024 I reported 30k profit after all expenses. YTD this year I had made 25k so far after all expenses.

Situation is this:

I applied for a HELOC on my primary home. They calculated the rental income as $1400/mo. But then they added the PITI+HOA to my DTI calculation (which was $3400 a month) causing the Airbnb to be a net negative of $2700 to my DTI (50% of rental income being $700, then them subtracting $3400)

Is this correct? I filled the Fannie Mae Rental worksheet using my 24' data and it had it as $6500 before PITI+HOA, $3200 after, I'm not sure how they came up with this. But it's affecting my ability to open the full line I was looking for. Anyone have advice on this?

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Patrick Roberts
Lender · Charleston, SC · Member since 2019 · 1k+ posts · 1k+ votes
1y

This isnt a FNMA loan so the income wont be calculated in that manner. Most HELOC lenders have an internal method of scrubbing income because that kind of loan lives on their balance sheet. You'll have to ask the lender about how they arrived at the figures and what can be done about it.

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  • Patrick Roberts
    Lender · Charleston, SC · Member since 2019 · 1k+ posts · 1k+ votes
    1y

    This isnt a FNMA loan so the income wont be calculated in that manner. Most HELOC lenders have an internal method of scrubbing income because that kind of loan lives on their balance sheet. You'll have to ask the lender about how they arrived at the figures and what can be done about it.

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  • Ezra Benjamin Harris
    OP
    Investor · Orlando, FL · Member since 2020 · 17 posts · 3 votes
    1y

    @Patrick Roberts I am also considering moving primaries, so you would think a traditional loan lender may calculate that income differently?

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    • Patrick Roberts
      Lender · Charleston, SC · Member since 2019 · 1k+ posts · 1k+ votes
      1y
      Quote from @Ezra Benjamin Harris:

      @Patrick Roberts I am also considering moving primaries, so you would think a traditional loan lender may calculate that income differently?

      It's very possible that this will be the case. If you get a conforming loan (Fannie/Freddie), then income calcs will follow the methods spelled out in the guidelines. The fannie and freddie selling guides are very specific in how net rental income is calculated for rental properties. There is a little room for interpretation and discretion, but not much. Since it sounds like you had the property in operation for all of 2024, then Sched E for your 2024 Return will be the starting point. If 24 is on extension, then 2023 will be used. 

      If you completed the FNMA rental income calculator correctly, then that should be figure used for a FNMA loan. Freddie has a calculator as well but it's nearly the same thing. Some lenders may have more restricted overlays than this, so you may have to call around to find a lender without overlays. 

      Like Jason said, it's definitely worth exploring. 
      1Reply
    • Ezra Benjamin Harris
      OP
      Investor · Orlando, FL · Member since 2020 · 17 posts · 3 votes
      1y
      Quote from @Patrick Roberts:
      Quote from @Ezra Benjamin Harris:

      @Patrick Roberts I am also considering moving primaries, so you would think a traditional loan lender may calculate that income differently?

      It's very possible that this will be the case. If you get a conforming loan (Fannie/Freddie), then income calcs will follow the methods spelled out in the guidelines. The fannie and freddie selling guides are very specific in how net rental income is calculated for rental properties. There is a little room for interpretation and discretion, but not much. Since it sounds like you had the property in operation for all of 2024, then Sched E for your 2024 Return will be the starting point. If 24 is on extension, then 2023 will be used. 

      If you completed the FNMA rental income calculator correctly, then that should be figure used for a FNMA loan. Freddie has a calculator as well but it's nearly the same thing. Some lenders may have more restricted overlays than this, so you may have to call around to find a lender without overlays. 

      Like Jason said, it's definitely worth exploring. 

      Just found out the reason they aren't counting back in my HOA and mortgage interest and taxes is because I file under Schedule C instead of E. Those things are still spelled out on my Schedule C worksheet.

      In your experience have you had any luck writing an explanation and getting those things added back as if it were on a schedule e?

      Thanks

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  • Devin PetersonBusiness Member
    Lender · Sarasota, FL · Member since 2022 · 2k+ posts · 676 votes
    1y
    Quote from @Ezra Benjamin Harris:

    I have a condo in Florida I use for Airbnb. It was down most of 2023 due to Hurricane Ian in 2022. I had a tax return loss of 21k including all expenses PITI+HOA in 2023. In 2024 I reported 30k profit after all expenses. YTD this year I had made 25k so far after all expenses.

    Situation is this:

    I applied for a HELOC on my primary home. They calculated the rental income as $1400/mo. But then they added the PITI+HOA to my DTI calculation (which was $3400 a month) causing the Airbnb to be a net negative of $2700 to my DTI (50% of rental income being $700, then them subtracting $3400)

    Is this correct? I filled the Fannie Mae Rental worksheet using my 24' data and it had it as $6500 before PITI+HOA, $3200 after, I'm not sure how they came up with this. But it's affecting my ability to open the full line I was looking for. Anyone have advice on this?


    Any traditional quasi govy lender will 100% use your reported income averaged over 12-24 months to qualify the income. They might even apply a vacancy factor of 25%. So that's why you're seeing a negative loss. Only way to qualify the true income would is to use a nonqm DSCR product. However, those are no owner occupied products. Meaning - you cannot live in it. If this is a true AIRBNB property then I would recommend looking into DSCR Heloan or cash out refi (depending what current first rate is) blended rate may be higher with a 2nd heloc. I'm in florida myself and see this situation all the time. Happy to chat and talk more! Good luck!

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