When you buy a new home before selling your current one—or when you relocate for work and keep the old property—you temporarily carry two mortgages. Underwriters need to verify you can handle both obligations, and the rules that govern that calculation aren't always intuitive.
The default: both payments count at full PITI
Unless you provide documentation to the contrary, the underwriter adds both mortgage payments—principal, interest, taxes, insurance, HOA dues and mortgage insurance—to your debt-to-income ratio. If your existing home costs $2,100 per month in PITI and your new mortgage will cost $2,800, the underwriter starts by counting $4,900 against your income. That's the baseline assumption, and it often pushes DTI above the threshold for approval.
Pending-sale credit: signed contract required
If you have a ratified purchase contract on your current home, most lenders will exclude that payment from DTI. You'll need to provide the signed contract, proof the buyer is fully approved or has waived financing, and evidence of expected net proceeds. The closing date must fall within a reasonable window—typically within 90 days of your new loan closing. This is the cleanest path: once the underwriter verifies the sale is certain, the old payment drops out entirely.
Lease-in-place credit: signed lease and reserves
When you plan to keep the old property as a rental, a signed lease with a tenant already in place can offset the payment. The underwriter typically applies 75 percent of the gross rent as qualifying income, deducting 25 percent for vacancy, maintenance and management. You'll need the signed lease, proof of security deposit, evidence the tenant has moved in, and reserves covering six months of the old PITI in liquid accounts. If the lease covers $2,400 and your old PITI is $2,100, the underwriter credits $1,800 toward income, offsetting most of the payment.
Rental-income projections: appraisal or market-rent schedule
If you intend to rent the property but don't yet have a tenant, some programs allow projected rental income. The underwriter orders a Form 1007 rent schedule or market-rent analysis from the appraiser, then applies the same 75 percent factor. You'll still need reserves—often twelve months of PITI instead of six—and the property must qualify as investment-grade. Not all loan products permit projected rent; many conforming programs require a lease in hand or two years of landlord history before the income counts.
The Alliance take
Carrying two mortgages during a transition is common, but the underwriting isn't automatic. Document your exit strategy early: if you're selling, get the contract signed and the buyer qualified; if you're renting, line up the tenant and build reserves. Both paths work; neither works on a handshake. Start an application if you're planning a move and want to model the debt calculation before you commit.
Consult a CPA or attorney; this is not tax or legal advice.