1. What is the Fannie Mae Rental Calculator?

Definition: This calculator estimates the net rental income according to Fannie Mae's standard formula for rental property evaluation.

Purpose: It helps real estate investors and lenders determine the qualifying rental income for mortgage underwriting purposes.

2. How Does the Calculator Work?

The calculator uses Fannie Mae's standard formula:

Where:

• Net Rental — Qualifying rental income (USD)
• Gross Rent — Total rental income (USD)
• PITI — Principal, Interest, Taxes, and Insurance payments (USD)
• 0.75 — Fannie Mae's standard 25% vacancy factor

Explanation: Fannie Mae applies a 25% vacancy factor (hence the 0.75 multiplier) to gross rents and then subtracts the mortgage payment (PITI) to determine net rental income.

3. Importance of Rental Income Calculation

Details: Proper rental income estimation is crucial for mortgage qualification, determining property cash flow, and making informed investment decisions.

4. Using the Calculator

Tips: Enter the total gross rent from the property and the monthly PITI payment. The calculator will show the net rental income according to Fannie Mae guidelines.

5. Frequently Asked Questions (FAQ)

Q1: Why does Fannie Mae use 75% of gross rent?
A: The 25% reduction accounts for potential vacancies and maintenance costs, providing a conservative estimate of rental income.

Q2: What exactly is included in PITI?
A: PITI includes Principal, Interest, property Taxes, and Insurance payments on the mortgage.

Q3: Is this calculation used for all rental properties?
A: This is Fannie Mae's standard formula, but other lenders or situations might use different calculations.

Q4: Can the vacancy factor change?
A: The 25% factor is standard, but in some cases with strong rental history, lenders might consider a smaller adjustment.

Q5: How is this net rental income used?
A: Lenders use it to determine if the rental income sufficiently covers the mortgage payment and contributes to your overall income.