Home
Back
Fannie Mae Rental Income Formula:
| From: | To: |
The Fannie Mae rental income calculation is a standard method used in mortgage underwriting to determine the amount of rental income that can be counted toward a borrower's qualifying income. It applies a 75% factor to gross rents to account for vacancies and expenses.
The calculator uses the Fannie Mae formula:
Where:
Explanation: The 25% reduction accounts for potential vacancies and maintenance costs associated with rental properties.
Details: Accurate rental income calculation is crucial for mortgage underwriting as it helps determine the borrower's debt-to-income ratio and overall loan eligibility.
Tips: Enter the total monthly gross rent amount in USD. The calculator will automatically apply the 75% factor to determine the usable income for underwriting purposes.
Q1: Why does Fannie Mae use 75% of gross rent?
A: The 25% reduction accounts for potential vacancies, maintenance costs, property management fees, and other expenses associated with rental properties.
Q2: Does this apply to all rental properties?
A: This is the standard Fannie Mae guideline for 1-4 unit investment properties. Different rules may apply for multi-family properties or primary residences with rental units.
Q3: Can I use actual expenses instead of the 25% reduction?
A: In some cases with proper documentation, actual expenses may be used, but the 75% rule provides a standardized approach for most underwriting scenarios.
Q4: How does this affect my mortgage application?
A: The usable rental income is added to your other qualifying income when calculating your debt-to-income ratio for loan approval.
Q5: Are there exceptions to this rule?
A: Some loan programs or property types may have different guidelines, and experienced landlords with documented rental history may qualify for different treatment.