You’re staring at a spreadsheet, trying to figure out if that duplex is actually going to help you qualify for a mortgage, or if the bank is just going to laugh you out of the room. It’s a stressful spot. Most people think if a tenant pays $2,000, they get to tell the bank they make an extra $2,000.
Honestly? It doesn't work like that.
Fannie Mae is the giant behind the scenes of the American mortgage market, and they have very specific, kinda annoying rules about how much of that rent money actually "counts." If you're trying to use a fannie mae rental income calculator, you’re likely looking for Form 1037, Form 1038, or the newer digital versions that lenders use to see if you’re a "good" risk.
The math isn't just basic addition. It’s a mix of tax returns, "vacancy factors," and sometimes, a bit of luck with how your appraiser feels that day.
The 75% Rule: Why Your Rent "Shrinks"
Fannie Mae doesn't believe you’ll get paid every single month. They assume things go wrong. Water heaters burst. Tenants move out at 2 AM. Because of this, they generally only let you use 75% of the gross rent.
If your lease says $2,000, the fannie mae rental income calculator is going to spit out $1,500.
That 25% "haircut" covers vacancy loss and maintenance. It’s non-negotiable for most. You could have a tenant who has lived there for ten years and never missed a day of rent; Fannie Mae still assumes they might leave tomorrow.
Two Different Worlds: Schedule E vs. New Leases
How you calculate the income depends entirely on how long you’ve owned the place. This is where people get tripped up.
The Tax Return Method (Schedule E)
If you’ve owned the property for a while, the lender is going to demand your most recent federal tax returns. They look at IRS Form 1040, Schedule E.
They don't just look at the "net income" line. That would be too simple. Instead, they take your total rents and add back certain "non-cash" or "paper" expenses.
- Depreciation: This is a big one. It’s a tax write-off, not a check you actually wrote, so they add it back to your income.
- Interest, Taxes, and Insurance: They add these back because they’re going to subtract the current full monthly payment (PITIA) later in the formula.
- Amortization/Casualty Loss: Also added back.
Basically, they’re trying to find your "true" cash flow before the tax man got involved.
The Lease Agreement Method
Maybe you just bought the house. Or maybe you're converting your old home into a rental. Since you don't have a tax history for it yet, you use a lease.
In this scenario, the lender needs a Form 1007 (for single-family) or Form 1025 (for 2-4 units). This is an appraisal report where a professional tells Fannie Mae, "Yeah, $2,000 is a fair price for this neighborhood."
You take the lesser of the actual lease or the appraiser's market rent, then multiply by 0.75.
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The Big 2026 Update: Accessory Dwelling Units (ADUs)
Here is something that has actually changed recently. For a long time, if you had a "granny flat" or a basement apartment (an ADU), Fannie Mae was really stingy about letting you use that income to qualify for a primary residence.
As of early 2026, the rules have loosened up quite a bit.
If you’re buying a one-unit home with an ADU, you can now use that rental income to help you qualify, provided the appraiser can prove it’s a legal (or "legal non-conforming") unit and there’s a market for it. There’s a catch, though: the ADU income usually can't make up more than 30% of your total qualifying income.
It’s a huge win for people trying to buy in expensive cities like Seattle or Austin where a little extra rent makes the mortgage possible.
What Happens if the Math is Negative?
This is the part that keeps investors up at night.
If your fannie mae rental income calculator shows a "loss"—meaning 75% of your rent is less than your mortgage, taxes, and insurance—that loss is treated as a debt. It gets added to your other monthly bills, like car payments or student loans.
This nukes your Debt-to-Income (DTI) ratio.
On the flip side, if it’s positive, that "net rental income" gets added to your salary. It makes you look like a high-earner.
Common Pitfalls: The "History" Requirement
You can't just decide to be a landlord today and use the income tomorrow. Fannie Mae typically wants to see that you have a "history of receiving rental income" or at least one year of property management experience.
If you don’t have that one-year history, many lenders will only let you use the rental income to offset the mortgage on that specific property. You can’t use the "extra" profit to help you qualify for a more expensive house elsewhere.
It’s a subtle distinction, but it’s the difference between getting a "Yes" and a "No" from the underwriter.
Short-Term Rentals: The Airbnb Headache
If you're running an Airbnb, don't expect the bank to just take your word for it. Fannie Mae is notoriously skeptical of short-term rental income.
Unless you have two years of tax returns showing that the property consistently makes money as a vacation rental, they might try to treat it as a long-term rental—which usually means lower "market rent" numbers. They want stability. They want a 12-month lease. If you don't have that, be prepared to provide a mountain of documentation.
How to Prepare Your Own Calculation
If you want to do this like a pro before talking to a loan officer, follow these steps:
- Find your Schedule E: Look at line 3 (Total Rents).
- Add back the "Good" stuff: Find lines 9 (Insurance), 12 (Mortgage Interest), 18 (Taxes), and 20 (Depreciation). Add those back to your total.
- Divide by months: If the property was rented all year, divide by 12. If you bought it in July, divide by the actual months it was "in service."
- Subtract PITIA: Take that monthly number and subtract your full monthly mortgage payment (Principal, Interest, Taxes, Insurance, and HOA).
The number you're left with is what the lender sees.
Actionable Next Steps
Don't wait until you find the "perfect" house to do this math.
- Download the Official Forms: Search for Fannie Mae Form 1037 (for principal residences) or Form 1038 (for investment properties). These are the actual worksheets the underwriters use.
- Check Your "Fair Rental Days": If your tax returns show you only rented the place for 200 days because you were renovating, make sure your lender knows that. Otherwise, they’ll divide your income by 12 months, making you look less profitable than you are.
- Get a Preliminary Market Rent Study: If you’re buying a new place, ask your realtor for a "Rent Comps" report. It’s not an official appraisal, but it’ll give you the number to plug into that 75% calculation so you aren't guessing.
The fannie mae rental income calculator is just a tool, but knowing the logic behind it is the real secret to getting your loan approved.