Tips to Set Up an Investment Property
The biggest key to getting your DTI correct on an investment property is making sure you’ve correctly completed the Net Rental for the Subject Property field.
MM doesn’t factor in the proposed housing payment the same way it does for a primary residence. It relies on this field (which can be found on Page 1 of the 1003).
You need to complete this field in one of two ways:
- If you are not using any rental income from the subject property, you should enter the entire proposed payment (PITIA) as a negative amount.
- If you are using rental income from the subject property, then you’ll need to subtract the proposed payment from the rental income amount and enter the resulting amount. Keep in mind if you are using a lease (vs income calculated from tax returns), you’ll need to take 75% of the lease amount and then subtract the proposed PITIA.
For example, lets assume your proposed PITIA payment for the subject property is $1,700. If you are not using any rental income from the subject property, you’d enter -$1,700 into the field.
Now, assume you are using rental income for the same property and you have a lease amount of $1,800 per month. You’d take 75% of $1,800 and then subtract $1,700. ($1,800 X .75) – $1,700 = -$350. You’ll need to enter -$350 into the field.
Finally, keep in mind that as this is a manual field, you’ll need to continue to update it throughout the loan process if there are any PITIA changes or changes in the amount of rental income you are able to use.
Setting up an Investment Proprty in MM
Daniel Lewis 11.18.2020