1. What is Fannie Mae Rental Income Calculation?

The Fannie Mae rental income calculation is used in mortgage underwriting to determine the usable portion of rental income from an investment property. Fannie Mae guidelines specify that only 75% of the gross rent can be counted as income for qualifying purposes.

2. How Does the Calculator Work?

The calculator uses the Fannie Mae formula:

Where:

• Gross Rent — Total rental income from the property
• 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 underwriting as it helps determine the borrower's debt-to-income ratio and loan qualification.

4. Using the Calculator

Tips: Enter the total gross rent amount in USD. The calculator will automatically apply the 75% factor to determine the usable income for underwriting purposes.

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 the standard Fannie Mae guideline, but exceptions may apply for properties with strong rental history or other special circumstances.

Q3: How does this affect mortgage qualification?
A: The usable rental income is added to the borrower's other income when calculating debt-to-income ratios.

Q4: Are there different rules for multi-unit properties?
A: The 75% factor is standard, but additional documentation may be required for multi-unit properties.

Q5: Does this apply to both conventional and FHA loans?
A: This specific calculation is for conventional loans following Fannie Mae guidelines. FHA may have different requirements.