Thinking about buying your next home but not quite ready to give up your current one?
You may not have to.
Fannie Mae just updated its rental income guidelines, and the changes could make it easier for some homeowners to turn their current home into a rental while buying their next one.
🔑 What Changed?
Here’s the big one: you don't necessarily need to find a tenant before buying your next home.
If you're converting your current primary residence into a rental, we may now be able to use documented market rent to help you qualify.
Generally, we can use 75% of the supported market rent to help offset the mortgage payment on the home you're keeping.
📋 What Does “Documented Market Rent” Mean?
Nope, we can't just say, “My neighbor gets $2,800, so mine should too.” 😂
Fannie allows the market rent to be supported by:
An appraisal that includes market rents
A Comparable Rent Schedule (Form 1007)
A market-rent analysis using sources such as MLS, Zillow or Redfin, supported by at least three comparable rental properties
And here's an important change: an executed lease cannot be used to determine the qualifying rental income for a departing residence.
Even if you've already found a tenant and signed a lease, the qualifying rent still needs to be supported using the acceptable market-rent documentation.
💰 What Could That Look Like?
Current mortgage payment: $2,000
Supported market rent: $2,600
75% of rent: $1,950
Instead of the entire $2,000 payment affecting qualification, the difference may be just $50.
That's a pretty big deal.
⚠️ There's Still Some Fine Print
Because...mortgages. We can't have nice things without guidelines. 😂
If 75% of the market rent doesn't cover the full payment, the shortage counts toward your debt-to-income ratio.
If it produces more than enough to cover the payment, the extra generally can't be used as additional qualifying income for the departing residence.
And borrowers with less than 12 months of property-management experience may also need six months of reserves for the home they're converting to a rental.
🐼 Mama Bear's Take
This isn't about telling everyone to become a landlord.
It's about realizing that selling isn't your only option.
If you've built equity or have a great interest rate on your current home, it may be worth asking one question before putting up the For Sale sign:
“What happens if I keep it?”
🌮 Let's Taco 'Bout Your Options
Thinking about moving? Let's run both scenarios.
Sell it. Keep it. Rent it.
I'll help you look at the numbers so you can decide which option makes the most sense for you.
Reach out and let's Taco 'Bout it. 🌮
