1. What is the FNMA Rental Income Calculation?

The Fannie Mae (FNMA) rental income calculation uses 75% of the gross rent to determine qualifying income for underwriting purposes. This accounts for potential vacancies and expenses when evaluating a borrower's ability to repay.

2. How Does the Calculator Work?

The calculator uses the FNMA formula:

Where:

• Gross Rent — Total monthly rental income before expenses
• 0.75 — FNMA's standard 25% reduction factor

Explanation: FNMA assumes 25% of gross rent will be needed for vacancies, maintenance, and other expenses, leaving 75% as net qualifying income.

3. Importance of Rental Income Calculation

Details: Accurate rental income calculation is crucial for mortgage underwriting, determining loan eligibility, and assessing a borrower's debt-to-income ratio.

4. Using the Calculator

Tips: Enter the total monthly gross rent amount in USD. The value must be greater than 0.

5. Frequently Asked Questions (FAQ)

Q1: Why does FNMA use 75% of gross rent?
A: This accounts for typical vacancy rates and operating expenses associated with rental properties.

Q2: Are there exceptions to the 75% rule?
A: In some cases with documented higher net income or multi-year leases, FNMA may allow higher percentages.

Q3: How does this differ from Freddie Mac's calculation?
A: Freddie Mac uses a similar approach but may apply different percentages based on property type and documentation.

Q4: Does this apply to all rental properties?
A: Primary residences with rental units or vacation homes may have different calculation methods.

Q5: How often should rental income be verified?
A: Typically verified through leases and tax returns during the underwriting process.