Conventional loans · Fannie Mae B3-3.8-02Using rental income from the home you're buying: duplexes, fourplexes and ADUs

Fannie Mae lets a buyer use rental income from the property being purchased when it is a two- to four-unit principal residence, a one- to four-unit investment property, or a one-unit principal residence with one accessory dwelling unit (ADU). The lender must document the buyer's current housing payment. On a purchase it uses the appraiser's rent schedule – Form 1007 for one unit or Form 1025 for a small income property – and, when a lease is being transferred to the buyer, a copy of the fully executed lease, which must be supported by the market rents; if the lease rent is not supported, the lender either justifies it in writing or uses the lesser amount. Qualifying income is gross monthly rent × 75%, minus the property's full payment (PITIA). A buyer with 12 months or more of rental property management experience can use a positive result in full; with less experience, a positive result only offsets the payment; a negative result always counts in the debt-to-income ratio. For an ADU, rental income is allowed from only one existing ADU, only on purchases and limited cash-out refinances, and it can be no more than 30% of the total qualifying income.