1. What is Fannie Mae Rental Income Calculation?

The Fannie Mae rental income calculation estimates usable rental income for mortgage underwriting by taking 75% of the gross rent. This adjustment accounts for potential vacancies and maintenance costs.

2. How Does the Calculator Work?

The calculator uses the Fannie Mae formula:

Where:

• Gross Rent — Total monthly rental income before expenses
• 0.75 — Fannie Mae's standard adjustment factor (25% reduction)

Explanation: Lenders typically only count 75% of rental income to account for potential vacancies and maintenance costs.

3. Importance of Rental Income Calculation

Details: Accurate rental income calculation is crucial for mortgage qualification, determining debt-to-income ratios, and property investment analysis.

4. Using the Calculator

Tips: Enter the total monthly gross rent amount in USD. The calculator will automatically compute 75% of this amount.

5. Frequently Asked Questions (FAQ)

Q1: Why does Fannie Mae only count 75% of rental income?
A: The 25% reduction accounts for potential vacancies, maintenance costs, and other expenses associated with rental properties.

Q2: Is the 75% factor always used?
A: While 75% is standard, some lenders may use different percentages based on property type, location, or borrower qualifications.

Q3: How does this affect mortgage qualification?
A: The usable rental income is added to your other income when calculating your debt-to-income ratio for mortgage approval.

Q4: Does this apply to all rental properties?
A: The 75% rule typically applies to 1-4 unit investment properties. Different rules may apply for multi-family properties or primary residences with rental units.

Q5: Are there exceptions to this rule?
A: In some cases with strong rental history or certain property types, lenders may use a higher percentage of the gross rent.