Can I use rental income on a departing residence

Rental income from a departing primary residence can be used for qualification, but eligibility, income caps, equity thresholds, landlord experience requirements, and documentation vary significantly by program and lender.

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Guideline Requirements

Freddie Mac

Rental income from a converted primary residence is explicitly eligible. Freddie Mac's guidelines state: "Rental income generated from the conversion of a Primary Residence to an Investment Property is eligible provided it meets the requirements of this subsection."

• Calculation: Use 75% of gross monthly rent from the lease. "The 25% adjustment is made to compensate for vacancies, operating and maintenance costs and any other unexpected expenses."
• Landlord experience — critical income cap:
  • "The full amount of the net rental income can be used only when documentation in the Mortgage file demonstrates that at least one Borrower has a minimum of one year of investment property management experience."
  • "If no Borrower has at least one year of investment property management experience, net rental income is limited to the amount that offsets the PITI and, when applicable, mortgage insurance premiums, leasehold payments, HOA dues (excluding unit utility charges) and payments on secondary financing on the converted Primary Residence."
• DTI Treatment: "Subtract the monthly payment amount from the net rental income: If the result is positive, add it to the stable monthly income. If the result is negative, add it to the monthly liabilities."
• Documentation required:
  • Current, fully executed lease
  • For newly executed leases: first rental payment due date must be no later than the first payment due date of the subject mortgage
  • Lease income supported by Form 72/Form 1000, OR two months rental payment receipts, OR security deposit plus first month's rent (bank statements, canceled checks, or third-party money transfer app evidence)

Fannie Mae

Rental income from a 1–4 unit investment property (including a departing residence converted to investment use) is eligible, but restrictions apply based on current primary housing payment and property management experience

Per the Fannie Mae non-subject property table:

• Current housing payment + management experience: Rental income used in qualifying has no restrictions.
• Current housing payment + NO management experience: Rental income can only offset the PITIA of the related property.
• No current housing payment: No rental income can be used in qualifying.

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Lender Overlays / Matrix

JMAC Lending — Balboa Non-Conforming JMAC Lending

"If attempting to use rental income from a departing residence, a copy of the executed 12-month term lease, verification of receipt of the security deposit and proof of the first month's rent deposited to borrower's account is required. The property may not be leased to a family member. If no lease/deposit is available, a recently completed appraisal Form 1007 or 1025 (as applicable) can be used to determine gross market rent."

• Qualifying rental income = gross rents × 75%.

JMAC Lending — Monterey Non-Conforming JMAC Lending

Adds an explicit 25% equity / LTV threshold and a two-year landlord history requirement:

• 25% or more equity in departure property:
  • With documented two-year history of managing rental properties: 75% of rental income can be used to offset the payment; 12 months PITIA reserves required for the departure property.
  • Without two-year history: Signed leases may not be used for rental income unless FICO > 760 AND $100,000 in post-close reserves (or required transaction reserves, whichever is greater).
• Less than 25% equity: "Both of the current and the proposed mortgage payments must be used to qualify the borrower for the new transaction; and minimum reserves of 6 months of PITIA are required for the departure property."

JMAC Lending — Newport Non-Conforming JMAC Lending

Lists departing residence separately under "Rental Income — Departing Residence." Required documentation for a new lease: copy of executed lease, verification of security deposit, and first month's rent deposited to borrower's account. Property may not be leased to a family member.

JMAC Lending — FHA Product JMAC Lending

"Rental income from a borrower departing residence may be considered with the following: an appraisal documenting at least 25% equity in the property and 1007 for market rent. The borrower must be relocating to an area more than 100 miles from the current residence. A current lease with a term no shorter than 12 months, and evidence of receipt of a security deposit is required."

JMAC Lending — VA IRRRL JMAC Lending

Most restrictive VA position: "Rental income from a property being vacated by the veteran can only be used to offset the mortgage payment and may not be used as effective income."

Mega Capital — Simple MVP Mega Capital

Distinguishes between leased and unleased departure properties:

• Leased: "If the current residence will become a rental property, the net rental income for a new lease may be used to offset carrying costs or to add to qualifying income. 75% of the new lease will be used to determine the qualifying rental income. Net positive income may be used." Requires: copy of current lease, proof of receipt of deposit and 1st month's rent, and evidence rent is near market (Form 1007 or equivalent).
• Unleased: "Positive cash flow from departing residence without a lease in place may not be added to income. Use 1007 and apply the 75% rule to determine cash flow. An additional 2 months of PITI on our subject property is required when using rents on an unleased property."

Mega Capital — Simple Elite Bank Statement Mega Capital

"Departing Residence (rental income): The property may not be leased to a family member. Lease agreement must be for a minimum 12-month term. Copy of the executed lease, verification of security deposit and proof of the first-month's rent deposited to borrower's account. NOTE: In all departing residence rental income instances, qualifying rental income will be gross rents x 75%."

Mega Capital — MVP Matrix

States a stricter overlay on positive income use: "Departing residence positive rental income cannot be used to qualify. Departing residence PITIA/ITIA can be offset by 75% of projected net rental income... Departing residence rental that produces a loss must be included in DTI."

• Note: Under the MVP Matrix, rental income from a departing residence can only offset PITIA — it cannot be added to qualifying income.

Mega Capital — Silver Jumbo Mega Capital

Enforces a 25% equity threshold: "To determine if rental income may be used to qualify, equity must be documented... If less than 25% equity in the departure property: rental income may not be used to qualify."

Greenbox — Underwriting Guide Greenbox Greenbox

"If a borrower intends to retain their current primary residence as an investment property, the PITIA of the departing residence may be offset to reduce the total DTI ratio... The rental income used for the offset is calculated at 75% of the gross monthly rent... An additional two (2) months of reserves are required, based on the departing residence PITIA, in addition to the program's matrix reserve requirements."

• The offset amount must be the lesser of the calculated rental income or the full PITIA of the departing residence.

Nations Direct — Non-QM Underwriting Guidelines

"When a borrower vacates a principal residence in favor of another principal residence, the rental income, reduced by the appropriate vacancy factor, may be considered in the underwriting analysis. 75% of the monthly gross rental income less the property's PITIA is utilized for qualification. A properly executed lease agreement of at least one year's duration after the loan is closed is required. Evidence of receipt by the borrower of the security deposit or the first and last month's rent... must also be provided."

New Wave Lending New Wave Lending

"Departure residence: Lease agreement, Proof of receipt of security deposit and first month's rent. Market rent analysis (Fannie Mae form 1007 or 1025) are required."

• Note: New Wave Lending also requires Form 1007 for the departing residence — an overlay beyond some other lenders.

New Wave Lending — AQM DSCR

"Departing Rental Income: 75% of gross rental income can be used to qualify. If borrower does not have any landlord experience rental income can be used up to offset PITIA only."

Newfi Lending — Sequoia NQM & Rainier Newfi Lending Newfi Lending Newfi Lending

Consistent across all three Newfi products: 75% of lease used for qualifying rental income; net positive income may be added. For unleased properties: PITI may only be offset (no income addition); an additional 2 months PITI reserves required on the subject property when using unleased market rents.

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Program Comparison

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Key Underwriting Guardrails

• 75% gross rent is the universal calculation factor across all lenders and agencies — no exceptions found.
• A signed 12-month lease, security deposit evidence, and first month's rent receipt are required by virtually every lender before rental income can be counted.
• Landlord/property management experience is a critical swing factor. Without it, most conventional and agency programs cap the income at a PITIA offset only — not as additional qualifying income.
• 25% equity threshold is enforced by JMAC Monterey, Mega Capital Silver Jumbo, and JMAC FHA. Below this threshold, rental income is either disallowed entirely or the departure residence payment must be fully included in DTI.
• VA loans are the most restrictive — rental income from a vacated property can only offset the payment and may not be counted as effective income JMAC Lending
• Unleased properties can generally only support a PITIA offset using Form 1007 market rents; Mega Capital Simple MVP Mega Capital and Newfi Newfi Lending Newfi Lending Newfi Lending require additional reserves (2 months PITI on the subject) in that scenario.
• Family members cannot be the tenant on a departing residence across all programs reviewed.