1. What is Fannie Mae Rental Income Calculation?

The Fannie Mae rental income calculation is used by mortgage lenders to determine how much rental income can be counted toward a borrower's qualifying income. Fannie Mae guidelines allow 75% of gross rental income to be used for qualification purposes.

2. How Does the Calculator Work?

The calculator uses the Fannie Mae formula:

Where:

• Gross Rent — Total rental income before expenses
• 0.75 — Fannie Mae's standard adjustment factor

Explanation: The 25% reduction accounts for potential vacancies and maintenance expenses.

3. Importance of Rental Income Calculation

Details: Accurate rental income calculation is crucial for mortgage qualification, especially for investment properties or multi-unit properties where the owner will occupy one unit.

4. Using the Calculator

Tips: Enter the total gross rental income in USD. This should be the actual or projected rental amount before any expenses.

5. Frequently Asked Questions (FAQ)

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

Q2: Is this calculation used for all rental properties?
A: This is Fannie Mae's standard calculation. Some lenders or special programs may use different percentages.

Q3: How is rental income verified?
A: Lenders typically require a lease agreement, tax returns showing Schedule E income, or an appraisal with a rental income analysis.

Q4: Does this apply to primary residences with rental units?
A: Yes, for multi-unit properties where the owner occupies one unit, rental income from the other units can be counted at 75%.

Q5: Are there exceptions to the 75% rule?
A: In some cases with strong rental history (2+ years), lenders may be able to use a higher percentage.