DTI Calculator
Debt-to-income with rentals counted the way an underwriter counts them — which is not the way most investors expect.
Monthly income
Rentals you own
$1,350 credited − $1,600 payment = -$250.00Counts as debt
$1,800 credited − $1,500 payment = $300.00Counts as income
Monthly debts
The new loan
Assumptions
Back-end DTI
44.49%
$3,915 of obligations against $8,800 qualifying income
Front-end DTI
30.11%
Housing payment alone
A rental is working against you. $250 a month is counted as debt rather than income. If rents counted in full your back-end would be 38.18% instead of 44.49%.
| Employment & other income | $8,500 |
|---|---|
| Rental income credited | $300 |
| Qualifying income | $8,800 |
| Consumer debts | $1,015 |
| Rental shortfalls | $250 |
| Proposed housing payment | $2,650 |
| Total obligations | $3,915 |
| Max housing at 45.00% | $2,695$45 of room left |
| If rents counted in full | 38.18% |
Estimates only. Guidelines vary by loan product and lender overlays, income documentation rules are their own subject, and how a specific debt is counted can differ from what is modelled here. Not a loan commitment, an offer of credit, or a pre-approval.
Your rental probably does not help as much as you think
Debt-to-income is simple arithmetic — obligations over income — and for a salaried buyer with a car payment it is genuinely simple. For an investor it is not, because rental property does not enter the calculation the way people assume, and the difference is large enough to sink an approval.
The rule is this: underwriting credits roughly 75 percent of gross rent, then subtracts the property’s full PITIA — principal, interest, taxes, insurance and dues. What remains is added to your income if it is positive. If it is negative, it does not quietly reduce the benefit; it becomes a monthly liability counted against you.
Work the default scenario. Elm St rents for $1,800 against a $1,600 payment. In your own accounting that is $200 a month of income. Underwriting credits 75 percent of $1,800 — $1,350 — against a $1,600 payment, so the property contributes negative $250. A $450 swing on one house, in the wrong direction, on a property that genuinely does cash flow.
Oak Ave, renting at $2,400 against $1,500, survives the haircut: $1,800 credited less $1,500 is $300 of real qualifying income. The difference between the two is not whether they cash flow — both do — but whether they cash flow by enough to survive a 25 percent cut to the top line.
The aggregate effect is on this page. Back-end DTI comes out at about 44.5 percent. If rents counted in full it would be 38.2 percent. Six points of ratio, produced by nothing but the convention, and six points is the difference between comfortable and declined.
Two practical consequences. First, a marginal rental is worse than no rental for qualifying purposes — which is a genuinely strange incentive, and one worth knowing before you buy a property that barely covers itself. Second, the 25 percent haircut is applied uniformly, so a well-run property with a five-year tenant is penalised exactly as much as a badly run one. There is no credit for doing it properly.
The other thing that catches people is the departing residence. If you are buying and selling, whether the old payment counts depends on timing and documentation — under contract with a closing date before the new loan funds is usually excluded; still on the market usually is not, and both payments count. Resolve that with a lender before you write an offer, not after.
Once you know the housing payment you can support, turn it into a price with the mortgage calculator. And remember the ceiling is a ceiling, not a target — a file at the maximum has no room for the rate to move between application and closing.
Methodology
- Rental contribution = (gross rent × factor) − PITIA. Positive contributions are added to income; negative ones are added to debts. The factor defaults to 75 percent and is adjustable.
- Qualifying income = employment + self-employment + other documented income + positive rental contributions.
- Total obligations = consumer debts + rental shortfalls + the proposed housing payment.
- Front-end = housing ÷ qualifying income. Back-end = total obligations ÷ qualifying income.
- Max housing payment = (qualifying income × target) − consumer debts − rental shortfalls, floored at zero.
The comparison figure — what the ratio would be if rents counted in full — treats every property’s gross rent less PITIA as income and applies no shortfall as debt. It exists to make the cost of the convention visible, and it is not how any lender computes anything.
Not modelled: income documentation rules, self-employment averaging, how a specific student loan payment is counted when in deferment, lease-versus-market-rent evidence, departing-residence exclusions, or lender overlays. Those are underwriting judgements rather than arithmetic, and they vary by product.
Frequently asked questions
- How is debt-to-income calculated?
- Back-end DTI is every monthly obligation — the proposed housing payment plus car loans, student loans, minimum card payments and other recurring debt — divided by qualifying monthly income. Front-end is the housing payment alone over the same income. Back-end is the one that usually decides whether a loan is approved.
- Does rental income help my DTI?
- Less than you would expect, and sometimes not at all. Agency underwriting credits roughly 75 percent of gross rent — a standard haircut for vacancy and maintenance — and then subtracts the property's full PITIA. Whatever is left is added to income if it is positive. If it is negative, the shortfall is added to your debts. A property renting at $1,800 against a $1,600 payment looks like it helps by $200 and actually hurts by $250.
- Why is 75% used instead of the full rent?
- Because gross rent is not what a property produces. The 25 percent haircut stands in for vacancy, turnover and repairs, without requiring the underwriter to verify any of them property by property. It is a blunt instrument and it is applied uniformly, which means it penalises a well-run property with long tenancies exactly as much as a badly run one. The factor is adjustable here because products and lender overlays vary.
- What DTI do I need to qualify?
- Conventional loans commonly go to 45 percent and can stretch toward 50 with strong compensating factors — reserves, credit, low LTV. Some products go higher. But the threshold is the lender's, and hitting it exactly is not the goal: a file at 49 percent has no room for a rate change or an appraisal surprise between application and closing.
- Does my current mortgage count if I am selling?
- It depends on the timing and the documentation. A departing residence under contract with a closing date before the new loan funds is usually excluded; one still on the market generally is not, and both payments count. This is one of the most common reasons a comfortable-looking file fails, and it is worth resolving with your lender before you write an offer rather than after.
- How much house can I afford at my target DTI?
- Work backwards: qualifying income times the target ratio, less every non-housing obligation, leaves the largest housing payment that fits. That is the figure this tool reports. Turn it into a price with the mortgage calculator, and remember it is a ceiling rather than a recommendation.
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