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| Rental Income Worksheet | |||||||
| Principal Residence, 2- to 4-unit Property: Monthly Qualifying Rental Income | |||||||
| Documentation Required: | Address of Principal Residence: | ||||||
| § Schedule E (IRS Form 1040) OR | |||||||
| § Lease Agreement or Fannie Mae Form 1007 or Form 1025 | Enter | Rental Unit | Rental Unit | Rental Unit | |||
| Step 1. When using Schedule E, 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: The number of months the property was in service: | Result | ||||||
| Step 2. Calculate monthly qualifying rental income using Step 2A: Schedule E OR Step 2B: Lease Agreement or Fannie Mae Form 1025. | |||||||
| Step 2 A. Schedule E – Part I For each property complete ONLY 2A or 2B | |||||||
| A1 | Enter total rents received (from the non-owner-occupied units). May enter rent from individual unit(s) or combine. | Enter | |||||
| A2 | Subtract total expenses. | Subtract | |||||
| A3 | Add back insurance expense. | Add | |||||
| A4 | Add back mortgage interest paid. | Add | |||||
| A5 | Add back tax expense. | Add | |||||
| A6 | Add back homeowners’ association dues. This expense must be specifically identified on Schedule E in order to add it back. | Add | |||||
| A7 | Add back depreciation expense or depletion. | Add | |||||
| A8 | Add back 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 | |||
| A9 | Divide by the number of months the property was in service (Step 1 Result). | Divide | 0 | 0 | 0 | ||
| Step 2A. Result: Monthly qualifying rental income (or loss): | Result | 0 | 0 | 0 | |||
| Step 2B. Lease Agreement OR Fannie Mae Form 1025 For each property complete ONLY 2A or 2B | |||||||
| This method is used when the transaction is a purchase, the property was acquired subsequent to the most recent tax filing. | |||||||
| B1 | Enter the gross monthly rent (from the lease agreement) or market rent (from Form 1025) for the applicable rental unit | Enter | |||||
| B2 | Multiply gross monthly rent or market rent by 75% (.75). The remaining 25% accounts for vacancy loss, maintenance, and management expenses. | Multiply | x.75 | x.75 | x.75 | ||
| Equals monthly rental income per unit | Total | 0 | 0 | 0 | |||
| B3 | Combine the monthly rental income of all non-owner-occupied rental units (up to a maximum of 3 rental units since rental income is not eligible for the unit occupied by the borrower). | Add | 0 | ||||
| Step 2B. Result: Monthly qualifying rental income: | Result | 0 | |||||
| Step 3. Determine the qualifying impact using the combined result of Step 2A or Step 2B. | |||||||
| 3A | Add the monthly qualifying rental income to the borrower’s monthly qualifying income. | 0 | |||||
| 3B | Identify the full amount of the PITIA as the borrower’s primary housing expense and include it in the debt-to-income ratio. Use proposed PITIA when the subject property; existing PITIA when not the subject property. |
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| DU Data Entry | Monthly Income and Combined Housing Expenses | Mortgage Liabilities | |||||
| Subject Property | Enter the amount of the monthly qualifying income “Subject Net Cash.” | Include as the borrower’s primary housing expense. For refinance transactions, identify the mortgage as a subject property lien. | |||||
| Non-Subject Property | Enter the amount of the monthly qualifying income “Net Rental.” | Include as the borrower’s primary housing expense. | |||||
| Refer to the Rental Income topic in the Selling Guide for additional guidance. | |||||||