FNMA BUSINESS RENTAL INCOME FROM INVESTMENT PROPERTIES (1039)

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Rental Income Worksheet
Business Rental Income from Investment Property(s):   Qualifying Impact of Mortgaged Investment Property PITIA Expense
Documentation Required: Enter Property Address Property Address  Property Address Property Address
§   IRS Form 8825 (filed with either IRS Form 1065 or 1120S)  OR        
§  Lease Agreement
 Enter the mortgagee and the mortgage loan account number. Enter Mortgagee/# Mortgagee/# Mortgagee/# Mortgagee/#
       
Step 1.   When using IRS Form 8825, determine the number of months the property was in service by dividing the Fair Rental Days by 30.
If Fair Rental Days are not reported, the property is considered to be in service for 12 months unless there is evidence of a shorter term of service.
Step 1.  Result: Enter The number of months the property was in service: Result        
Step 2.  Calculate monthly property cash flow using Step 2A:  IRS Form 8825 OR Step 2B:  Lease Agreement.
Step 2A.    IRS Form 8825 (IRS Form 1065 or 1120S)                              For each property complete ONLY 2A or 2B
A1 Enter gross rents received. Enter        
A2 Enter total expenses. Subtract        
A3 Enter insurance expense. Add        
A4 Enter mortgage interest paid. Add        
A5 Enter tax expense. Add        
A6 Enter homeowners’ association dues. Add        
This expense must be specifically identified on Form 8825 in order to add It back.
A7 Enter depreciation expense or depletion. Add        
A8 Enter any one-time extraordinary expense (e.g., casualty loss). There must be evidence of the nature of the one-time extraordinary expense. Add        
  Equals adjusted rental income. Total 0 0 0 0
A9 The number of months the property was in service (Step 1 Result). Divide 0 0 0 0
  Equals adjusted monthly rental income Total 0 0 0 0
A10 Enter proposed PITIA (for subject property) or existing PITIA (for non-subject property). Subtract        
Step 2A.  Result:  Monthly property cash flow: Result 0 0 0 0
Step 2B.  Lease Agreement                         For each property complete ONLY 2A or 2B                                                                                                                                                                                                                                               This method is used in certain circumstances (e.g., when the property was acquired subsequent to the most recent tax filing or
the lender has justification for using a lease agreement).
B1 Enter the gross monthly rent (from the lease agreement)                          For multi-unit properties, combine the monthly qualifying income of all rental units. Enter        
B2 The remaining 25% accounts for vacancy loss, maintenance, and management expenses. Multiply x.75 x.75 x.75 x.75
  Equals adjusted monthly rents. Total 0 0 0 0
B3 Enter proposed PITIA (for subject property) or existing PITIA (for non-subject property). Subtract        
Step 2B.  Result:  Monthly property cash flow: Result 0 0 0 0
Step 3.   Determine qualifying impact of the mortgaged investment property PITIA expense.
If the result of Step 2A or 2B is negative, include this loss, not to exceed the monthly PITIA expense, in the debt-to-income ratio.  
If the result of Step 2A or 2B is positive, the full amount of the PITIA expense has been offset.  Do not include it in the debt-to-income ratio..  
Important:  This worksheet provides a means of calculating an offset to the monthly PITIA.  To add any net income to the borrower’s qualifying income, additional requirements apply (e.g., two-year history vs. one-year history). Refer to the Self-Employment Income topic in the Selling Guide.
DU Data Entry Monthly Income and Combined Housing Expenses Mortgage Liabilities Real Estate Owned
Subject Property Enter the amount of the negative monthly property cash flow in “Subject Net Cash.”  If the monthly property cash flow is positive enter $0.00 For refinance transactions, identify the mortgage as a subject property lien. If REO Schedule is completed, confirm that the “Net Rental Income” field reflects either
§   the amount of the property              cash flow if it is negative, or
§   $0.00 if the monthly property cash flow is positive.
Non-Subject Property Enter the amount of the negative monthly property cash flow in “Net Rental.” If the monthly property cash flow is positive, enter $0.00 Identify the mortgage as a rental property lien.
Refer to the Rental Income topic in the Selling Guide for additional guidance.          

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September 6, 2017

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