Thanks for the info August. For Lan's question though (and I'm really curious/interested too) what is the allowable DTI? Also to be clear, am I understanding correctly that for your DTI calculations you take 100% of rental loan, and 75 % of rental income?

Allowable DTI isn't really determined by the lender (unless they have what we call "overlays" which are more restrictive.) Rather, it's determined by the AUS (automated underwriting system.) Basically, a computer assesses the risk and says yes or no (that's very over-simplified, but I think you get the point.) So, if you have a super high FICO, plenty of assets in reserve, a low DTI, and a low LTV, then it's quite possible you can go up to 50% DTI with Fannie or Freddie. That's not a guarantee, and is more the exception than the rule. More common is to go up to 45% DTI.

For this: "Also to be clear, am I understanding correctly that for your DTI calculations you take 100% of rental loan, and 75 % of rental income?" It depends. Are you talking about for a purchase of a rental? If so, then we look at what the appraiser says are market rents, take 75% of that, and it can be used to offset the proposed loan payment. So, if market rents are $1000, we'd give you $750 toward offsetting whatever the proposed mortgage payment will be. So if the payment will be $800 per month (PITIA), then you'd have a "net rental income" of -$50. Does that make sense?

If you have a rental that on your Schedule E, then the formula is different. You would simply use the form 1038 for those.

Does that help? Clear as mud? :)