Yes, you can use rental income to qualify for a mortgage, but lenders won’t necessarily count every dollar you collect. For new or anticipated rental income, they typically start with 75% of the expected rent. For rentals you already own, they generally look at the income reported on your tax returns.
How much actually helps you qualify depends on the property, its expenses, and whether you have experience as a landlord.
Key takeaways
- Rent can count in four situations: a rental you already own, a home you’re turning into a rental, an investment property you’re buying, or the rented units of a 2- to 4-unit home you’ll live in.
- For new rental income, lenders generally use 75% of rent. They then account for the property’s monthly payment, including taxes, insurance, and association dues. Existing rentals reported on your tax returns are calculated differently.
- Landlord experience matters. With at least 12 months of documented property management experience, positive rental income may increase the income you qualify with. Without it, rental income generally can only offset the property’s payment, with different treatment for owner-occupied multi-unit homes.
- Converting your current home works differently under Fannie Mae’s updated rules. Required for applications dated December 1, 2026, or later, the rules use market rent rather than a lease to calculate qualifying income. That income can only offset the old home’s payment, even for experienced landlords. Lenders can adopt the rules sooner, and Tomo Mortgage already has.
- Freddie Mac has different requirements. It requires a signed lease for a converted home and can allow positive rental income to increase qualifying income if you have at least a year of landlord experience.
- You’ll need documentation. Expect to provide tax returns, rental records where applicable, and proof of your current housing payment.
This page reflects agency rules announced as of October 2026, including Fannie Mae changes that lenders must adopt by December 1.
How mortgage lenders calculate qualifying rental income
For new or anticipated rental income, lenders generally start with 75% of the gross monthly rent. That 25% reduction accounts for vacancies and expenses that come with renting out a property.
They then subtract the property’s full monthly housing payment: principal, interest, property taxes, homeowners insurance, and any association dues. Together, these are called PITIA. Fannie Mae calls the result adjusted net rental income.
One detail that often catches borrowers by surprise is the 25% vacancy factor. When lenders use anticipated rental income rather than income already reported on Schedule E, they generally count only 75% of the expected rent toward qualification.
Here’s an example for a rental you’re buying that brings in $2,400 a month and has a $1,950 monthly payment:
- $2,400 × 0.75 = $1,800
- $1,800 − $1,950 = −$150
You’re collecting enough rent to cover the property’s payment, but for mortgage qualification, the lender sees a $150 monthly loss.
That $150 is added to your monthly debts when calculating your debt-to-income ratio (DTI). A positive result could either offset the payment or increase your qualifying income, depending on your situation.
What if you already own the rental? If the property appears on Schedule E of your tax returns, lenders generally start with that reported income and expenses instead of automatically taking 75% of the rent. They can add back certain expenses, such as depreciation, before accounting for the property’s payment.
The rent used in these calculations also needs documentation. For a property you’re buying, the lender generally uses the appraiser’s rent schedule: Form 1007 for a one-unit home or Form 1025 for two to four units.
If a lease shows higher rent than the market supports, Fannie Mae requires the lender to justify the amount in writing or use the lower figure.
What counts depends on your situation
Not all rental income is treated the same way. A rental you’ve owned for years is different from a home you’re about to rent out for the first time.
Here’s how the main situations compare under Fannie Mae’s rules:
| Your situation | How the rent is documented | How it’s calculated | What can count |
| A rental you already own | Most recent federal tax return with Schedules 1 and E | Tax-return cash flow, with permitted expense add-backs, minus the property’s full payment | With 12+ months of experience, positive income can increase qualifying income. A loss counts as debt. |
| Your current home, becoming a rental | Appraisal, Form 1007, or market data with at least three comparable rentals | 75% of market rent minus the old home’s payment | Can offset the old home’s payment only. A loss counts as debt. |
| An investment property you’re buying | Form 1007 or 1025, plus any lease transferring with the sale | 75% of rent minus the property’s full payment | With 12+ months of experience, positive income can increase qualifying income. Otherwise, it can only offset the payment. |
| A 2- to 4-unit home you’ll live in | Form 1025 | Generally 75% of the rental units’ rent | Rental income is added to qualifying income, while the full property payment counts as debt. With less than 12 months of experience, the income counted cannot exceed the property’s payment. |
The important distinction is whether the rent helps cover an existing mortgage payment or actually increases your qualifying income. Both can help you get approved, but they affect the calculation differently.
For example, someone buying their first investment property may be able to use rent to offset that property’s payment. An experienced landlord buying the same property may also be able to count positive rental income toward the new mortgage.
And if you’re converting your current home into a rental, Fannie Mae’s updated rules limit the benefit to offsetting the old home’s payment, regardless of your experience.
If you’re considering your first rental purchase, our guide on how to buy an investment property covers the rest of the decision.
Rent from a one-unit home you live in, or from a second home, generally can’t be used to qualify. There are exceptions for boarders and accessory dwelling units (Fannie Mae B3-3.8-01).
For an accessory dwelling unit (ADU), Fannie Mae allows rent from one existing ADU on purchases and limited cash-out refinances, capped at 30% of total qualifying income.
Short-term rentals follow separate rules, covered in the FAQ below.
Turning your current home into a rental: what changed in 2026
If you’re buying a new home but want to keep your current one as a rental, the income from that property might help you qualify, but Fannie Mae changed how lenders calculate it.
Under the updated rules, expected rent from the home you’re moving out of can only offset that home’s payment. It can’t increase your qualifying income, even if you’re an experienced landlord.
Lenders also can’t use a lease to establish the qualifying rent. Instead, they have to use market data.
The changes are required for applications dated December 1, 2026, or later, although lenders can adopt them earlier. Tomo Mortgage has already adopted them, so they apply to Tomo Mortgage applications now.
A lender that hasn’t adopted the changes yet may still use the previous guidelines, which allowed a signed lease to establish the rental amount.
How Fannie Mae sets the rent now
The lender looks at what comparable properties in your area rent for.
Under Fannie Mae’s departing-residence rules, acceptable documentation includes:
- An appraisal that includes market rent.
- A Form 1007 rent schedule.
- Market analysis using tools such as Zillow, Redfin, or MLS, supported by at least three comparable rentals.
The lender takes 75% of that market rent and subtracts your current home’s full monthly payment.
If the result is positive, it can offset the old home’s payment. If it’s negative, the shortfall counts toward your monthly debts.
Do you need a lease or a certain amount of equity?
Under Fannie Mae’s updated rules, you don’t need a signed lease to establish qualifying rental income from the home you’re leaving. In fact, the lender can’t use a lease to set that amount.
That doesn’t mean you can’t sign a lease with a tenant. It just means the lender uses market rent to determine how much income counts.
Fannie Mae’s rules for converting a home to a rental also don’t set a minimum equity threshold. Individual lenders may have stricter requirements, but Tomo Mortgage doesn’t add rental-income requirements beyond the agencies’ guidelines.
Other loan programs work differently. For FHA loans, HUD’s guidance generally allows rental income from a home you’re leaving when you’re relocating more than 100 miles away. If there’s no rental history on that property, the lender also needs an appraisal showing market rent and at least 25% equity.
For VA loans, the VA Lender’s Handbook allows prospective rent to offset the old home’s payment when the rental prospects are reasonable. That income can’t be added to your qualifying income.
Freddie Mac handles it differently
Freddie Mac’s Guide 5306.1 requires a current, fully signed lease for a home you’re converting into a rental.
The first rent payment must be due no later than your new mortgage’s first payment. The rental amount also needs support from an appraisal or proof of rent received.
Freddie Mac generally counts 75% of the lease rent, then accounts for the property’s payment.
If at least one borrower has a year of investment property management experience, positive net rental income can count toward qualifying income. Without that experience, it can only offset the home’s payment.
That’s an important difference if you’re keeping your old home and buying another.
Tomo Mortgage underwrites loans to the applicable agency guidelines. Where Fannie Mae and Freddie Mac differ, Tomo Mortgage underwrites to one agency’s rules and delivers the loan to that agency after closing. Your loan officer can tell you which guidelines apply to your loan.
What this does to your budget
Say you’re moving out of your current home and expect to rent it for $3,000 a month. Its full monthly payment is $1,800.
Here’s the calculation:
- $3,000 × 0.75 = $2,250
- $2,250 − $1,800 = +$450
Under Fannie Mae’s updated rules, that $450 doesn’t get added to your qualifying income. Instead, the rent can offset the old home’s $1,800 payment.
Under Freddie Mac’s rules, with a qualifying signed lease and a borrower who has at least a year of landlord experience, the $450 may count as additional qualifying income.
Why does that matter? Even when the rent doesn’t add to your income, offsetting your old mortgage payment can lower your debt-to-income ratio. That may leave more room in your budget to qualify for the new home.
You’ll also need to think about cash reserves. If you have less than 12 months of landlord experience, Fannie Mae requires six months of the old home’s full monthly payment in reserves, in addition to any other applicable reserve requirements.
The 12-month landlord rule
One of the biggest factors in how rental income counts is whether you have experience managing a rental property.
Under Fannie Mae’s rules, positive rental income can generally increase your qualifying income only if you have at least 12 months of documented property management experience.
With less experience, the income generally can only offset the property’s payment, except for the different treatment of rental units in a home you’ll occupy.
You can document that experience through:
- Personal tax returns. Your most recent signed federal return, including Schedules 1 and E, showing rental income and 365 fair rental days.
- Business tax returns. Returns for a partnership or S corporation with Form 8825 showing a full year of rental activity.
- Additional rental records. If you’ve owned a property for at least a year but your latest return doesn’t show 365 rental days, an existing lease or another year’s tax return may help document the full history.
- An older lease. If the rental hasn’t appeared on a tax return yet, a fully signed lease dated at least 12 months before your mortgage application may establish your experience.
Freddie Mac also looks for at least one year of investment property management experience from at least one borrower.
There’s another requirement borrowers sometimes overlook: your current housing payment.
For rental income from a property you’re buying or a home you’re leaving, Fannie Mae generally requires proof of what you’re currently paying for housing.
That might be your mortgage payment, rent payments, or property taxes if you own your home outright. If you live rent-free with family, you may not be able to use that anticipated rental income to qualify.
There is an exception for existing rental properties when you’ve collected rent from the property for at least a year.
Documents to have ready before preapproval
Gathering your rental documents before preapproval can save time and help your loan officer work out how much income you can actually use.
Depending on your situation, you may need:
- Tax returns: Your most recent signed federal returns with Schedules 1 and E. Tomo Mortgage asks for the last two years at preapproval. If you hold rentals through a partnership or S corporation, you may also need business returns with Form 8825 (B3-3.8-04).
- Proof of your current housing payment: Bank statements, canceled checks, a management company verification, or a property tax bill.
- Rental agreements, where applicable: Any lease the lender is permitted to use, along with proof that rent is being paid. This may include two consecutive months of rent deposits. For a new lease, proof of the security deposit and first full month’s rent may be accepted instead.
You won’t necessarily need every document on this list. It depends on whether you’re already collecting rent, buying a new rental, or converting your current home.
How Tomo Mortgage reviews rental income at preapproval
Your loan officer first looks at whether you’re using rental income you already collect or rent you expect to receive in the future.
For existing rentals, Tomo Mortgage uses your two most recent years of tax returns to calculate what those properties bring in.
For anticipated rental income, you share how much you expect to collect, and the applicable vacancy adjustment is used to estimate what may count.
That figure remains an estimate until there’s a specific property and the required documentation. It can change before closing.
Fannie Mae also sets requirements for leases used to qualify. A newly signed lease on a property not yet reported on your tax return generally needs a term of at least six months, with the first rent due on or before your new mortgage’s first payment.
Leases with family members or other interested parties can’t be used to determine qualifying rental income under these rules (B3-3.8-01).
If you’ve owned a rental since the previous tax year, your tax return generally determines the income rather than the lease. There are exceptions, including properties that were temporarily out of service for renovations.
The lender orders any required appraisal or rent schedule. Fannie Mae also provides optional calculation worksheets: Form 1037 for a 2- to 4-unit home you’ll live in and Form 1038 for investment properties.
Getting these details right matters. In its loan quality reviews, Fannie Mae has identified miscalculated and undocumented rental income as a common problem in mortgage files.
For a broader look at what happens next, see Tomo Mortgage’s guide to the steps of getting a mortgage.
If your qualifying rental income comes up short
Sometimes the lender’s calculation leaves you with less qualifying income than you expected.
That doesn’t necessarily mean you can’t get approved. There are a few options worth discussing with your loan officer:
- Confirm which guidelines apply. Fannie Mae and Freddie Mac treat converted homes differently. Knowing which rules apply can help you understand your options.
- Revisit your price range. A smaller mortgage means a smaller monthly payment, which can make up for lower qualifying rental income. Our debt-to-income guide explains how the numbers work.
- Consider a co-borrower. Another borrower’s income may help you qualify, although that person also takes responsibility for the loan.
- Build your landlord history. Twelve months of documented experience can change how positive rental income counts for an investment property. It won’t change the departing-residence limitation under Fannie Mae’s updated rules.
- Consider selling instead of renting. If your current home is under contract and the financing contingencies have cleared, Fannie Mae may allow the old home’s payment to be excluded from your qualifying debts (B3-6-06).
The best choice depends on how much the rental income changes your qualification and what you want to do with the property long term.
Tomo Mortgage NMLS #2059741. Equal Housing Lender.
Frequently asked questions
Can I use a lease on the home I’m moving out of?
Not to establish qualifying rental income under Fannie Mae’s updated rules. The lender must use an appraisal, Form 1007, or market data supported by at least three comparable rentals.
You’re still allowed to sign a lease with a tenant. The restriction is about which documentation the lender can use to calculate income.
These rules are required for Fannie Mae applications dated December 1, 2026, or later. Freddie Mac takes a different approach and requires a signed lease for a converted home.
Do I need 30% equity in my current home to use its rent?
No. Fannie Mae’s updated rules for converting a home to a rental don’t set a minimum equity threshold, although individual lenders may have stricter requirements. Tomo Mortgage doesn’t add its own rental-income overlays.
FHA is different. When you have no rental history on the home you’re leaving, HUD’s guidance requires an appraisal showing at least 25% equity. You generally must also be relocating more than 100 miles away to use that rental income.
Why do lenders count only 75% of rent?
The 25% reduction helps account for vacancies, operating costs, maintenance, and other unexpected expenses, according to Freddie Mac’s guide. Fannie Mae refers to it as a vacancy factor.
This generally applies to new or anticipated rent. Existing rentals reported on tax returns usually use a different calculation based on actual income and expenses.
Does Airbnb or short-term rental income count?
It can, with additional restrictions.
Under Fannie Mae’s updated rules, rental income from a one-unit investment property may qualify if short-term rentals are legally permitted.
For a purchase, lenders generally use 50% of supported market rent rather than 75%, then subtract the property’s payment. Positive income can only offset that payment.
For a refinance, income already reported on Schedule E is generally calculated using tax-return cash flow instead. If the rental isn’t on Schedule E yet, the 50% calculation applies.
The updated requirements are mandatory for applications dated December 1, 2026, or later, although lenders may adopt them sooner.
Can ADU rent help me qualify?
Yes, with limits. Fannie Mae allows rent from one existing accessory dwelling unit on purchases and limited cash-out refinances, capped at 30% of total qualifying income.
Freddie Mac also caps qualifying ADU rental income at 30%.