qmqm[at]she.com (Jess) writes:

- quote -

I think they're doing it right.

Here's why -- the mortgage payments are obligations.
The rental income is a conditional. In other words,
you *have* to pay the mortgage on the rental property.
You may or may not succeed in having rental income.

Their calculation makes perfect sense -- what are
your *obligations* as a fraction of your income.

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

I am applying for a home equity loan with a majar mortgage company.
I think they are not doing the debt ratio Calulation correctly with
Rental Income and Mortgage.

Monthly Employment Income : $4000
Mortgage for Home : $1200

Mortgage for Rental : $800
Rental Income : $1000 (they count only 75% -> $750)

They are adding up all the mortgage payment for my Debt
($1200+$800=$2000)
and adding up all the income for employment and rent ($4000+$750 =
$4750)

The debt ratio they came up with is 2000/4750 = 42% which is too high
and I can't quality for tue loan.

But I believe they should use the net rental income/loss instead for
the rental property.
Net rental income = $750 - $800 = -50 (loss)


Debt= $1200 + 50(net rental loss) = $1250
Income $4000

Correct Debt Ratio = 1250/4000 = 31%

Anyone can confirm the right Calculation for me ?