Renting out the house you are leaving? Fannie Mae counts market rent, not the lease

On September 2, Fannie Mae reorganized how its Selling Guide handles rental income. The rules now sit in their own section, split into separate topics, and one of those topics covers a single situation: the home a buyer is moving out of and keeping as a rental.

That situation is common. A buyer finds the next house, does not want to sell the current one, and plans to rent it out. The question is how much of that future rent a lender can count.

A vacancy factor comes off the gross market rent first. The full housing payment on the departing home is then subtracted from what is left.

If the result is positive, it can cancel out that home’s own payment and nothing more. It is not added to the buyer’s income. If the result is negative, the shortfall counts against the buyer’s debt-to-income ratio.

There is a precondition. The lender has to document the buyer’s current housing payment before any rental income from the departing home can be used at all.

When a lender must start applying this text to a given application is set in Fannie Mae’s announcement. That page could not be opened for this briefing, so no date is given here. If a file is already in progress, ask which version of the rules it is being underwritten under.

It covers Fannie Mae conventional loans only. Freddie Mac, FHA and VA each have their own rules for a departing residence.

It does not say whether any particular buyer qualifies. That depends on the whole file, not one line of it.