My son is trying to refi the mortgage on his personal residence while rates are low. The mortgage broker brought this up as an obstacle as far as his debt to income ratio: he owns another house which he has rents out. The thing is, the rental house deed is in my son's name but the mortgage on it is NOT. The mortgage broker claims that the mortgage amount on the rental would of course not count against my son, but the property taxes and insurance on the rental would. I find this confusing, as property taxes and insurance are not generally considered personal debts. The only type of analogies that occur to me are things like if you owned title to a yacht and weren't responsible for paying any amount owed on it, would they say that you must be paying out a lot for things like maintenance, fuel and storage on the yacht so we're going to count that as debt you must pay on.
Does anyone know general underwriting standards well enough to tell me whether or not this is standard procedure? My son's income qualifies him for the refi unless he is required to include the taxes and insurance for the rental house as debt. Also, if this makes the situation any clearer, he claims the income from the rental on his tax return, but the depreciation and other expenses on the rental compared to the low amount he collects as rent (house in poor condition) makes it something of a wash. So he's not asking the potential new lender to include any of the rental income to meet the ratios.
Can someone explain to me what can legitimately be counted as debt on the ratio?