I am reviewing a loan to purchase a rental property. The loan write-up calculates a DTI ratio that includes the projected payment, but doesn't include the projected rental income ($600/mo). However, the write-up lists the projected rental income as the primary source of repayment. I think it would be difficult to defend that we didn't consider the rental income in making our credit decision when that will be the primary repayment source, but the borrower does qualify without that income.

I'm leaning toward reporting income as wages income plus rental income, but I'm not 100%.

Thoughts?

I think i'd be sending it back to the LO's (or underwriter's) desk and saying..."this doesn't make sense...please clarify"....and let them fix it, so that it becomes clear what you should report.

I usually do that, but this loan is from May (wasn't included in May's original report because it was booked incorrectly). So the LO doesn't remember the situation well enough to give an answer for this specific loan file. He just said "generally we consider all income sources".

It is very odd that the projected rental income was not included. From an analysts perspective, it should have been. That said, were they perhaps taking a far more conservative approach and testing the ability of the borrower to support the request in the event the property does not lease up?

I'm assuming that is the case. However, I think since we considered the rental income the primary source of repayment, it would be hard to argue that we didn't rely on the amount for our credit decision.

I guess my thought was....you know that the $600/month was the projected income....why can't they re-do the DTI calculation and include that figure? Then the file becomes self-explanatory for income used.