So the bank is not being fair by adding in your PITI into the debt part of the equation, but only including 75% of the rental income. They should take the 75% of the rental income and not factor the PITI from the investment properties into the DTI calc at all, or give you credit for 100% of your gross rental income, then factor your DTI with the PITI. It seems like the bank is safeguarding itself by factoring out "operating expenses, not once, but twice out of your investments. That is why I am now having a hard time obtaining financing on great, profitable properties!!! What ever I do, my DTI still comes in above 50%!!! It's like they are expecting you to obtain rents that would be in excess of 267% of your PITI!!!!!
The 75% of gross rents gets added to your personal income, and 100% of your PITI get added to your debt. Therefore, when you have a property with gross rents taken at 75% that equal or are close to the PITI on the property, this is going to negatively affect your DTI.
100% of the PITI is added as debt and the rent X 75% is added as income. For example if the property PITI is $1000 and it is rented for $1200 then $1000 is added as debt and $900 is added as income.
To prove this crazy percentage, I have entered the following equation assuming your PITI is $1000 (for simplicity)..75i = 2d.375(i/2) = di = (2d/.75)i = ((2*1000)/.75)i = 2,667d = 1,000i/d = 267%
If you are renting it for $2275 and your payment is $1770 then the rent would wash away the debt and it would have ZERO affect on your DTI. Because the debt that was added would be almost the same as the income that was added so your DTI would stay the same. That is all I am saying.