Why this deserves its own module
Understanding add-back, offset and DSCR conceptually is only half the job. The actual data-entry step — deciding exactly where a number goes — is where real files get miscalculated. This module is about the mechanics, not the theory already covered in Modules 02, 03 and 06.
Entering a surplus
A surplus produced by an offset calculation reduces the total monthly debt figure used in the TDS ratio. It is subtracted from debts, not added to gross income. That distinction matters because GDS typically only reflects the housing cost for the property the borrower actually lives in, while TDS includes all debts — a rental surplus generally affects TDS, not GDS, because GDS is specifically about the borrower's own housing cost.
Entering a shortfall
A shortfall works the same way in reverse: it's added to total monthly debts within TDS, exactly like any other liability line, expressed in dollars per month rather than as a percentage adjustment to income.
The mistake that shows up most often
The most common error is treating a surplus as if it were additional income — inflating the top line instead of reducing the debt line. In a simple, single-property case the two approaches can look deceptively similar, but once other debts and the qualifying or stress-tested rate are in the mix, they produce different ratios. Misstating which side of the ledger a surplus belongs on is exactly the kind of thing that gets caught at underwriting, and it costs the file time to fix.
A discipline, not a shortcut
Always work surplus and shortfall through the specific worksheet format the target lender actually uses (Module 05), and keep the arithmetic on the correct side of the ledger — debt side, not income side — every time, regardless of which lender or method is in play.
