Short answer: Under Fannie Mae's Selling Guide (B3-3.8-02), the lender multiplies the gross monthly rent by 75% and subtracts the property's full payment (principal, interest, taxes, insurance and HOA, or PITIA). The result is the adjusted net rental income. Rent comes from the appraiser's Form 1007 or 1025, or a lease that transfers to you.
Definition
Adjusted net rental income (ANRI) is how a lender following Fannie Mae's Selling Guide counts a rental on a purchase: 75% of the gross monthly rent minus the property's full payment (principal, interest, taxes, insurance and HOA, or PITIA). A negative result is added to the borrower's monthly debts; a positive one counts as income only with 12 months of property management experience.
By the numbers: On the US median home with 20% down at 7.32% (Freddie Mac, October 22, 2026) and the US median 3-bedroom rent, 75% of rent is $1,258 against a $2,349 payment, so the rental counts as $1,091 a month of debt (Census ACS 2024; Fannie Mae B3-3.8-02).
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Starts at the US median home ($360,600) and 3-bed rent ($1,677/mo), Census ACS 2024, at Freddie Mac's 7.32% rate. Assumes tax at 0.89% of price (US median), $1,200/yr insurance, 3% closing costs, 5% vacancy, 5% maintenance and 8% management. Adjust all of these in the full calculator.
The short answer
On a rental you're buying, a lender following Fannie Mae's rules counts only 75% of the gross monthly rent. It then subtracts the property's full payment: principal, interest, taxes, insurance and HOA, called PITIA. What's left is the adjusted net rental income (ANRI) (Fannie Mae Selling Guide B3-3.8-02, 09/02/2026).
Adjusted net rental income = gross rent × 75% − PITIAIf the result is negative, it is added to your monthly debts when the lender works out your debt-to-income ratio (DTI). If it is positive, a first-time landlord can use it only to cover that property's own payment, not as extra income.
On the US median home ($360,600) renting for the US median 3-bedroom rent ($1,677/mo, Census ACS 2024), with 20% down at 7.32% (Freddie Mac, October 22, 2026): 75% of rent is $1,258, the payment is $2,349, so the rental counts as −$1,091 a month of debt. The rent would have to be about $3,132 for the lender to count it as breaking even.
Good to know: This page covers conventional loans sold to Fannie Mae. FHA, VA, portfolio and DSCR lenders have their own rules, and any lender can add stricter ones (called overlays). Ask yours how it counts rent before you make an offer.
How the 75% rule works, step by step
For a purchase, Fannie Mae's guide spells out the calculation:
1. Gross rent. The lender gets the market rent from the appraiser on a Single-Family Comparable Rent Schedule (Form 1007), or the small income property appraisal (Form 1025) for 2–4 units. If a tenant's lease transfers to you, it also gets a copy of the lease. If market rents don't support the lease, the lender has to justify the lease figure or use the lower amount.
2. Take 75%. Gross monthly rent × 0.75 is the net rental income. Fannie Mae doesn't itemize what the 25% covers; it works as a flat allowance for vacancy and ongoing expenses, so you don't list those separately.
3. Subtract PITIA. Principal and interest on the new loan, plus monthly property tax, insurance and any HOA dues. The result is the adjusted net rental income.
4. Apply it to your DTI. Negative goes into your monthly debts. Positive goes into income only if you have at least 12 months of property management experience.
Tip: You can see the lender's view in the FirstDoor calculator: set vacancy to 25%, and maintenance and management to 0%. Cash flow then equals the adjusted net rental income. Open the US median home that way.
The 12-month experience rule
How much of the rent can help you depends on your track record as a landlord (B3-3.8-01):
- 12 months or more of property management experience: a positive result can be added to your income, and a negative one goes into your debts.
- Less than 12 months: a positive result can only offset the rental's own payment. It can't raise your income. A negative one still goes into your debts.
The lender documents experience with your most recent signed tax return showing rental income on Schedule E for a full year (365 fair rental days), a business return with Form 8825, or in some cases a signed lease at least 12 months old.
The lender must also document your current housing payment (your rent, or the full payment on the home you own) to use any rental income from the property you're buying. A first-time buyer who lives rent-free with family can find that rental income doesn't count at all.
Red flag: Counting on the rental's income to qualify for your first rental. For a first-time landlord, the rule is designed so the rent can at best cancel out its own payment. Your job income has to carry everything else.
What it means on the US median home
The same US median home and rent, with the US median property tax ($3,211/yr), $1,200 a year insurance (assumed), no HOA and 3% closing costs, at different down payments. A bigger down payment shrinks the loan, so the payment falls and the rental counts as less debt:
| Down payment | Cash to close | PITIA / mo | 75% of rent | Adjusted net rental income | Rent to reach $0 |
|---|---|---|---|---|---|
| 20% down | $82,938 | $2,349 | $1,258 | −$1,091 | $3,132 |
| 25% down | $100,968 | $2,225 | $1,258 | −$968 | $2,967 |
| 30% down | $118,998 | $2,102 | $1,258 | −$844 | $2,802 |
| 40% down | $155,058 | $1,854 | $1,258 | −$596 | $2,472 |
| 50% down | $191,118 | $1,606 | $1,258 | −$348 | $2,141 |
Even at 50% down, the median home counts as −$348 a month of debt. Going from 20% to 25% down improves it by $124 a month. Click a row to open it in the calculator with the lender's 25% haircut.
Good to know: These figures use Freddie Mac's 7.32% average for a home you live in. Investment property loans usually cost more, which makes the payment, and the debt, bigger. See investment property mortgage rates.
Lender math vs cash flow math
The lender's number and your real cash flow answer different questions. The lender asks whether you can afford the loan if the rental disappoints. You ask whether the rental pays for itself.
| Fannie Mae 75% rule | FirstDoor cash flow | |
|---|---|---|
| Rent used | Appraiser's market rent (Form 1007/1025), or the lease | What you expect to collect |
| Costs taken from rent | A flat 25% | 5% vacancy + 5% maintenance + 8% management = 18%, adjustable |
| Fixed costs | Full PITIA | Principal and interest, tax, insurance and HOA (the same) |
| US median home, 20% down | −$1,091/mo | −$974/mo |
| What it decides | Your debt-to-income ratio and loan approval | Whether the deal is worth buying |
Because 25% is more than FirstDoor's default 18%, the lender's figure is lower than FirstDoor's cash flow on every one of the 98 cities below. A lender approving the loan does not mean the rental cash-flows, and a rental that cash-flows can still fail the lender's math.
Tip: Different again: a DSCR loan qualifies on the rental alone, usually as rent ÷ PITIA, without your job income. See what DSCR lenders want.
House hacks, 2–4 units and ADUs
The rules change when you live in the property:
- Rent from your own home doesn't count for a one-unit home you live in or a second home, apart from Fannie Mae's exceptions for boarders and accessory units.
- 2–4 units you live in: rent from the other units can count. The lender adds the qualifying rental income to your income and puts the full payment in your debts; it can't net the two against each other.
- An ADU (accessory dwelling unit) with a one-unit home you live in: rent from one existing ADU can count on a purchase or limited cash-out refinance, capped at 30% of your total qualifying income.
That is a big reason house hacking is a common first step: it gets owner-occupied loan terms and lets some rent count toward qualifying.
After you own it: refinances and your next loan
Once the rental shows up on your tax return, lenders mostly stop using the 75% rule for it. For a refinance, Fannie Mae has the lender run a cash flow analysis of Schedule E: the net rental income on your return plus depreciation, interest, HOA dues, taxes and insurance added back, averaged over the months the property was in service (usually 12). Then it subtracts the PITIA.
The same idea applies to rentals you already own when you apply for another loan: each one's income or loss is worked out separately and then added up. That means your tax return becomes your landlord résumé. Big deductions can lower the income a lender will count, although depreciation is added back.
Good to know: A lease can replace Schedule E in some cases, for example if you bought the property after your last tax return or it was out of service for a big renovation. Lease rules (minimum term, rent shown in bank statements, no family members as tenants) are in B3-3.8-01.
The 75% rule in 98 cities
Each city's median-priced home renting for the city's median 3-bedroom gross rent, 20% down on a 30-year loan at 7.32%, the city's median property tax, $1,200 a year insurance (assumed), no HOA: the same assumptions as the good cash flow guide. "Rent to reach $0" is the rent at which the lender's figure would be zero (PITIA ÷ 0.75). Sorted by adjusted net rental income.
| # | City | Median value | Median 3-bed rent | 75% of rent | PITIA / mo | Adjusted net rental income | Rent to reach $0 | FirstDoor cash flow |
|---|---|---|---|---|---|---|---|---|
| 1 | Detroit, MI | $95,900 | $1,255 | $941 | $745 | $196 | $993 | $284 |
| 2 | Cleveland, OH | $109,600 | $1,105 | $829 | $844 | −$15 | $1,125 | $63 |
| 3 | Toledo, OH | $122,600 | $1,146 | $860 | $922 | −$63 | $1,230 | $17 |
| 4 | Pittsburgh, PA | $220,400 | $1,630 | $1,222 | $1,456 | −$234 | $1,942 | −$120 |
| 5 | Birmingham, AL | $189,800 | $1,303 | $977 | $1,241 | −$264 | $1,655 | −$173 |
| 6 | Rochester, NY | $164,300 | $1,315 | $986 | $1,260 | −$274 | $1,680 | −$182 |
| 7 | Buffalo, NY | $187,000 | $1,217 | $913 | $1,255 | −$342 | $1,673 | −$257 |
| 8 | Memphis, TN | $209,800 | $1,418 | $1,064 | $1,415 | −$352 | $1,887 | −$252 |
| 9 | Lubbock, TX | $223,600 | $1,583 | $1,187 | $1,581 | −$394 | $2,108 | −$283 |
| 10 | Corpus Christi, TX | $234,000 | $1,616 | $1,212 | $1,653 | −$441 | $2,205 | −$328 |
| 11 | Gainesville, FL | $270,800 | $1,789 | $1,342 | $1,802 | −$460 | $2,402 | −$335 |
| 12 | Wichita, KS | $212,900 | $1,310 | $982 | $1,467 | −$484 | $1,956 | −$392 |
| 13 | Philadelphia, PA | $253,600 | $1,573 | $1,180 | $1,669 | −$489 | $2,225 | −$379 |
| 14 | St. Louis, MO | $214,500 | $1,275 | $956 | $1,462 | −$505 | $1,949 | −$416 |
| 15 | Tulsa, OK | $234,400 | $1,371 | $1,028 | $1,562 | −$533 | $2,082 | −$437 |
| 16 | Kansas City, MO | $261,600 | $1,641 | $1,231 | $1,771 | −$540 | $2,361 | −$425 |
| 17 | Indianapolis, IN | $241,500 | $1,406 | $1,054 | $1,614 | −$560 | $2,153 | −$462 |
| 18 | El Paso, TX | $209,600 | $1,319 | $989 | $1,558 | −$569 | $2,078 | −$477 |
| 19 | Baltimore, MD | $247,400 | $1,569 | $1,177 | $1,749 | −$572 | $2,331 | −$462 |
| 20 | Milwaukee, WI | $207,900 | $1,273 | $955 | $1,543 | −$588 | $2,057 | −$499 |
| 21 | San Antonio, TX | $260,900 | $1,707 | $1,280 | $1,869 | −$589 | $2,492 | −$470 |
| 22 | Oklahoma City, OK | $259,300 | $1,479 | $1,109 | $1,731 | −$622 | $2,308 | −$518 |
| 23 | Louisville, KY | $241,700 | $1,294 | $970 | $1,598 | −$628 | $2,131 | −$537 |
| 24 | Tucson, AZ | $299,700 | $1,688 | $1,266 | $1,895 | −$629 | $2,526 | −$511 |
| 25 | Cincinnati, OH | $263,300 | $1,588 | $1,191 | $1,859 | −$668 | $2,479 | −$557 |
| 26 | Columbus, OH | $279,900 | $1,672 | $1,254 | $1,935 | −$681 | $2,580 | −$564 |
| 27 | Omaha, NE | $269,500 | $1,658 | $1,244 | $1,953 | −$710 | $2,604 | −$593 |
| 28 | Norfolk, VA | $311,200 | $1,805 | $1,354 | $2,071 | −$717 | $2,761 | −$590 |
| 29 | Tallahassee, FL | $294,500 | $1,592 | $1,194 | $1,920 | −$726 | $2,560 | −$615 |
| 30 | Winston-Salem, NC | $281,200 | $1,445 | $1,084 | $1,824 | −$740 | $2,432 | −$639 |
| 31 | Houston, TX | $301,200 | $1,819 | $1,364 | $2,114 | −$750 | $2,819 | −$623 |
| 32 | Jacksonville, FL | $325,300 | $1,767 | $1,325 | $2,096 | −$771 | $2,794 | −$647 |
| 33 | New Orleans, LA | $305,100 | $1,624 | $1,218 | $2,001 | −$783 | $2,668 | −$670 |
| 34 | Greensboro, NC | $290,200 | $1,495 | $1,121 | $1,905 | −$783 | $2,540 | −$679 |
| 35 | Irving, TX | $349,800 | $2,123 | $1,592 | $2,414 | −$822 | $3,219 | −$674 |
| 36 | Knoxville, TN | $294,700 | $1,379 | $1,034 | $1,859 | −$824 | $2,478 | −$728 |
| 37 | Fort Worth, TX | $330,500 | $1,964 | $1,473 | $2,337 | −$864 | $3,116 | −$727 |
| 38 | Lexington, KY | $318,400 | $1,570 | $1,178 | $2,070 | −$892 | $2,760 | −$782 |
| 39 | Arlington, TX | $337,800 | $1,887 | $1,415 | $2,327 | −$912 | $3,103 | −$780 |
| 40 | Lincoln, NE | $278,200 | $1,403 | $1,052 | $1,965 | −$912 | $2,619 | −$814 |
| 41 | Albuquerque, NM | $324,600 | $1,550 | $1,162 | $2,115 | −$952 | $2,820 | −$844 |
| 42 | St. Petersburg, FL | $436,200 | $2,351 | $1,763 | $2,729 | −$966 | $3,638 | −$801 |
| 43 | Dallas, TX | $340,400 | $1,856 | $1,392 | $2,383 | −$991 | $3,177 | −$861 |
| 44 | St. Paul, MN | $301,800 | $1,475 | $1,106 | $2,106 | −$1,000 | $2,808 | −$896 |
| 45 | Hialeah, FL | $446,800 | $2,326 | $1,744 | $2,756 | −$1,011 | $3,674 | −$848 |
| 46 | Orlando, FL | $430,200 | $2,293 | $1,720 | $2,749 | −$1,030 | $3,666 | −$869 |
| 47 | Virginia Beach, VA | $403,200 | $2,019 | $1,514 | $2,587 | −$1,073 | $3,449 | −$931 |
| 48 | Fresno, CA | $396,300 | $1,902 | $1,426 | $2,519 | −$1,093 | $3,359 | −$959 |
| 49 | Mesa, AZ | $440,800 | $2,076 | $1,557 | $2,652 | −$1,095 | $3,536 | −$949 |
| 50 | Spring Valley, NV | $440,200 | $2,095 | $1,571 | $2,703 | −$1,132 | $3,604 | −$985 |
| 51 | Phoenix, AZ | $454,900 | $2,142 | $1,606 | $2,751 | −$1,145 | $3,668 | −$995 |
| 52 | Chicago, IL | $341,200 | $1,661 | $1,246 | $2,404 | −$1,159 | $3,206 | −$1,042 |
| 53 | Bakersfield, CA | $406,500 | $1,986 | $1,490 | $2,657 | −$1,167 | $3,542 | −$1,028 |
| 54 | Nashville, TN | $438,800 | $2,064 | $1,548 | $2,717 | −$1,169 | $3,623 | −$1,025 |
| 55 | Minneapolis, MN | $368,300 | $1,748 | $1,311 | $2,497 | −$1,186 | $3,329 | −$1,063 |
| 56 | Richmond, VA | $377,900 | $1,682 | $1,262 | $2,497 | −$1,235 | $3,329 | −$1,118 |
| 57 | Aurora, CO | $494,600 | $2,397 | $1,798 | $3,034 | −$1,236 | $4,045 | −$1,068 |
| 58 | Charlotte, NC | $431,900 | $1,969 | $1,477 | $2,721 | −$1,245 | $3,629 | −$1,107 |
| 59 | Las Vegas, NV | $458,300 | $2,067 | $1,550 | $2,804 | −$1,254 | $3,739 | −$1,109 |
| 60 | Colorado Springs, CO | $479,500 | $2,145 | $1,609 | $2,894 | −$1,285 | $3,859 | −$1,135 |
| 61 | Durham, NC | $439,400 | $1,989 | $1,492 | $2,798 | −$1,306 | $3,731 | −$1,167 |
| 62 | Worcester, MA | $411,700 | $1,892 | $1,419 | $2,777 | −$1,358 | $3,702 | −$1,225 |
| 63 | Tempe, AZ | $488,600 | $2,072 | $1,554 | $2,943 | −$1,389 | $3,924 | −$1,244 |
| 64 | Stockton, CA | $456,800 | $2,000 | $1,500 | $2,895 | −$1,395 | $3,860 | −$1,255 |
| 65 | Raleigh, NC | $450,300 | $1,909 | $1,432 | $2,845 | −$1,413 | $3,793 | −$1,280 |
| 66 | Newark, NJ | $396,600 | $1,811 | $1,358 | $2,836 | −$1,478 | $3,782 | −$1,351 |
| 67 | Henderson, NV | $520,400 | $2,253 | $1,690 | $3,176 | −$1,486 | $4,234 | −$1,328 |
| 68 | Tampa, FL | $494,400 | $2,176 | $1,632 | $3,153 | −$1,521 | $4,204 | −$1,369 |
| 69 | Madison, WI | $418,400 | $1,876 | $1,407 | $2,947 | −$1,540 | $3,929 | −$1,409 |
| 70 | Atlanta, GA | $462,200 | $1,918 | $1,438 | $3,029 | −$1,590 | $4,038 | −$1,456 |
| 71 | Providence, RI | $413,800 | $1,525 | $1,144 | $2,734 | −$1,590 | $3,645 | −$1,483 |
| 72 | Sacramento, CA | $515,800 | $2,170 | $1,628 | $3,259 | −$1,632 | $4,346 | −$1,480 |
| 73 | Tacoma, WA | $500,500 | $2,144 | $1,608 | $3,242 | −$1,634 | $4,323 | −$1,484 |
| 74 | Reno, NV | $567,700 | $2,224 | $1,668 | $3,423 | −$1,755 | $4,564 | −$1,599 |
| 75 | Plano, TX | $541,700 | $2,366 | $1,774 | $3,593 | −$1,818 | $4,790 | −$1,653 |
| 76 | Riverside, CA | $616,400 | $2,507 | $1,880 | $3,784 | −$1,904 | $5,046 | −$1,729 |
| 77 | Denver, CO | $636,400 | $2,570 | $1,928 | $3,853 | −$1,926 | $5,138 | −$1,746 |
| 78 | Portland, OR | $588,200 | $2,364 | $1,773 | $3,826 | −$2,053 | $5,102 | −$1,888 |
| 79 | Yonkers, NY | $521,700 | $2,128 | $1,596 | $3,764 | −$2,168 | $5,019 | −$2,019 |
| 80 | Miami, FL | $598,200 | $2,179 | $1,634 | $3,814 | −$2,180 | $5,085 | −$2,027 |
| 81 | Austin, TX | $571,000 | $2,217 | $1,663 | $3,860 | −$2,197 | $5,147 | −$2,042 |
| 82 | Jersey City, NJ | $571,700 | $2,249 | $1,687 | $4,002 | −$2,315 | $5,336 | −$2,158 |
| 83 | Alexandria, VA | $704,200 | $2,909 | $2,182 | $4,521 | −$2,339 | $6,028 | −$2,135 |
| 84 | Salt Lake City, UT | $620,100 | $1,747 | $1,310 | $3,745 | −$2,435 | $4,993 | −$2,312 |
| 85 | Washington, DC | $733,400 | $2,567 | $1,925 | $4,513 | −$2,588 | $6,018 | −$2,408 |
| 86 | Santa Ana, CA | $772,600 | $2,602 | $1,952 | $4,688 | −$2,737 | $6,251 | −$2,554 |
| 87 | Boston, MA | $722,800 | $2,153 | $1,615 | $4,443 | −$2,828 | $5,924 | −$2,677 |
| 88 | Honolulu, HI | $850,100 | $2,425 | $1,819 | $4,994 | −$3,175 | $6,659 | −$3,006 |
| 89 | Long Beach, CA | $849,500 | $2,676 | $2,007 | $5,245 | −$3,238 | $6,994 | −$3,051 |
| 90 | New York, NY | $778,600 | $2,094 | $1,570 | $4,935 | −$3,364 | $6,579 | −$3,217 |
| 91 | Anaheim, CA | $892,200 | $2,718 | $2,038 | $5,462 | −$3,424 | $7,283 | −$3,233 |
| 92 | Arlington, VA | $945,700 | $3,306 | $2,480 | $6,036 | −$3,556 | $8,048 | −$3,325 |
| 93 | San Diego, CA | $980,700 | $3,052 | $2,289 | $5,999 | −$3,710 | $7,998 | −$3,496 |
| 94 | Seattle, WA | $950,800 | $2,951 | $2,213 | $5,950 | −$3,737 | $7,934 | −$3,530 |
| 95 | Oakland, CA | $884,000 | $2,474 | $1,856 | $5,683 | −$3,827 | $7,577 | −$3,654 |
| 96 | Los Angeles, CA | $947,900 | $2,564 | $1,923 | $5,821 | −$3,898 | $7,762 | −$3,719 |
| 97 | Glendale, CA | $1,182,800 | $2,691 | $2,018 | $7,167 | −$5,149 | $9,556 | −$4,960 |
| 98 | San Jose, CA | $1,271,200 | $3,368 | $2,526 | $7,877 | −$5,351 | $10,503 | −$5,115 |
| United States | $360,600 | $1,677 | $1,258 | $2,349 | −$1,091 | $3,132 | −$974 |
Only 1 of 98 city comes out positive (Detroit, MI). In the median city the rental counts as −$1,113 a month, and the rent would need to be about 1.8 times the median 3-bedroom rent to reach zero. Click a figure to open that city's deal in the calculator with the lender's 25% haircut.
Good to know: These are citywide survey medians with margins of error, and the median home and the median rental are different houses. ACS reports rents above $3,500 only as "$3,500+", so San Francisco, CA and Irvine, CA are left out. Your lender will use the appraiser's rent for the actual house.
Before you apply
1. Run the lender's view of your deal: 75% of a realistic market rent minus the full payment. Use the rent by ZIP code tool as a sanity check on rent, then real comps.
2. If it's negative, add that amount to your monthly debts and see whether your DTI still works. Ask the lender for its maximum DTI on your loan.
3. Document your current housing payment: a rent verification from the management company, at least six months of bank statements or cancelled checks, or the mortgage already on your credit report.
4. Ask the lender for the appraiser's rent schedule (Form 1007) early. A low appraised rent lowers the income it can count.
5. Then judge the deal on its real cash flow, not on whether the loan gets approved.
Good to know: This is educational, not lending advice. Lenders apply Fannie Mae's rules with their own judgment and overlays, and the guide changes; check the current version and ask your loan officer.
Worked example
The US median home ($360,600, Census ACS 2024) bought as a rental with 20% down at 7.32% for 30 years (Freddie Mac average, October 22, 2026). Rent is the US median 3-bedroom gross rent ($1,677/mo), the US median property tax ($3,211/yr), $1,200/yr insurance (assumed), no HOA, closing costs assumed at 3% ($10,818). To match Fannie Mae's 75% rule, the calculator uses 25% vacancy and 0% maintenance and management, so cash flow equals the adjusted net rental income.
| Gross rent / mo | $1,677 |
| Lender haircut (25%) | −$419 |
| Taxes + insurance (/mo) | −$368 |
| Mortgage (P&I) | −$1,982 |
| Adjusted net rental income | −$1,091 |
| FirstDoor cash flow (18% costs) | −$974 |
Frequently asked questions
How do lenders calculate rental income on a property you are buying?
Under Fannie Mae's Selling Guide (B3-3.8-02), the lender multiplies the gross monthly rent by 75% and subtracts the property's full payment (principal, interest, taxes, insurance and HOA, or PITIA). The result is the adjusted net rental income. Rent comes from the appraiser's Form 1007 or 1025, or a lease that transfers to you.
What is the 75% rule for rental income?
It is the 25% haircut Fannie Mae applies to gross rent before counting it: only 75% of the rent is treated as net rental income, which works as a flat allowance for vacancy and ongoing expenses (the guide doesn't itemize it). FHA, VA, DSCR and portfolio lenders set their own rules.
Can I use rental income to qualify for my first rental property?
Only partly. With less than 12 months of property management experience, Fannie Mae lets a positive rental result offset only that property's own payment, not add to your income. A negative result is added to your monthly debts. The lender also has to document your current housing payment.
Does negative rental income count as debt?
Yes. If 75% of the rent is less than the full payment, the shortfall is added to your monthly obligations in the debt-to-income ratio. On the US median home ($360,600) at the US median 3-bedroom rent with 20% down at 7.32%, that is about $1,091 a month.
Can rent from a duplex I live in help me qualify?
Yes, on a 2–4 unit home you live in, rent from the other units can count. The lender adds the qualifying rental income to your income and includes the full mortgage payment in your debts. Rent from one ADU on a one-unit home you live in can also count, capped at 30% of your qualifying income.
How do lenders count rental income after I own the property?
Once the property is on your tax return, lenders generally use Schedule E: the net rental income plus depreciation, interest, HOA dues, taxes and insurance added back, averaged over the months in service, minus the PITIA. Leases can be used instead in some cases, such as a property bought after your last return.
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Sources
Educational content, not financial advice. Loan programs and requirements change; confirm with a lender.