1. What is FHA Rental Income Calculation?

The FHA (Federal Housing Administration) allows lenders to use 75% of gross rental income when underwriting mortgages for rental properties. This conservative approach accounts for potential vacancies and expenses.

2. How Does the Calculator Work?

The calculator uses the FHA rental income formula:

Where:

• Gross Rent — Total monthly rental income before expenses
• 0.75 — FHA's standard adjustment factor (75%)

Explanation: FHA uses 75% of gross rent to account for potential vacancies and maintenance costs, providing a conservative estimate of usable income.

3. Importance of Rental Income Calculation

Details: Accurate rental income calculation is crucial for mortgage qualification, determining debt-to-income ratios, and ensuring the property can support its mortgage payments.

4. Using the Calculator

Tips: Enter the total monthly gross rent amount in USD. The calculator will automatically compute the 75% figure used by FHA underwriting.

5. Frequently Asked Questions (FAQ)

Q1: Why does FHA use 75% of gross rent?
A: The 25% reduction accounts for potential vacancies, maintenance costs, and other expenses associated with rental properties.

Q2: Is this the same as Fannie Mae's calculation?
A: Similar, but Fannie Mae may use different percentages depending on the property type and documentation.

Q3: Can I use 100% of rental income if I have leases?
A: No, FHA requires the 75% adjustment regardless of existing leases or occupancy.

Q4: Does this apply to multi-unit properties?
A: Yes, the same 75% factor applies to each unit's rental income in multi-family properties.

Q5: What about rental income from ADUs or basement units?
A: The same 75% rule applies to accessory dwelling units when they meet FHA requirements.