From the RatesQ team · Sample question

Can I use rental income to qualify for an investment property loan?

This educational scenario and its sample explanations are not posts from real users.

I'm buying a rental property and the rents will be $2,200/month. The mortgage would be $1,750. Can I use the rental income to offset the new mortgage payment when qualifying?

Quick Summary

  1. Rental income may be considered under the applicable underwriting rules.
  2. Documentation and vacancy adjustments depend on the program and property history.
  3. Projected rent and established rental income may receive different treatment.

Sample explanations

From the RatesQ team

Yes, but at 75% of the gross rent. So $2,200 × 75% = $1,650/month of usable income. That's close to but not quite offsetting the $1,750 payment. If you have 2 years of Schedule E showing rental income, lenders can use that. For a new purchase with no lease yet, the appraiser's Form 1007 market rental analysis is typically used.

From the RatesQ team

Correct on the 75% rule for conventional. A few additional notes: if you don't have 2 years of landlord experience on your tax returns, some lenders are more conservative about counting rental income. Also, the full PITI (not just principal and interest) is used as the new obligation in DTI calculations. With $1,650 offsetting a $1,750 PITI, the net obligation to your DTI would be $100/month rather than the full $1,750 — which makes a significant difference in qualifying. DSCR lenders treat this differently (they just look at the rental income vs. debt service ratio on the property itself).