Fannie Mae Rental-Calculator 1039

Rental Income Worksheet

Business Rental Income from non-subject Investment Property(s): Qualifying Impact of Mortgaged Investment Property PITIA Expense

Documentation Required:

§ IRS Form 8825 (filed with either IRS Form 1065 or 1120S) OR
§ Lease Agreement

Enter

Property Address

Enter the mortgagee and the mortgage loan account number.

Enter

Mortgage#

Step 1.

When using IRS Form 8825, determine the number of months the property was in service by dividing the Fair Rental Days by 30.

If Fair Rental Days are not reported, the property is considered to be in service for 12 months unless there is evidence of a shorter term of service.

Step 1. Result:Enter The number of months the property was in service:

Result

Step 2.

Calculate monthly property cash flow using Step 2A: IRS Form 8825 OR Step 2B: Lease Agreement.

Step 2 A. IRS Form 8825 (IRS Form 1065 or 1120S)

For each property complete ONLY 2A or 2B

A1Enter gross rents received.

Enter

A2 Enter total expenses.

Subtract

A3Enter insurance expense.

Add

A4Enter mortgage interest paid.

Add

A5Enter tax expense.

Add

A6Enter homeowners’ association dues.
This expense must be specifically identified on Schedule E in order to add it back.

Add

A7Enter depreciation expense or depletion.

Add

A8Enter any one-time extraordinary expense (e.g., casualty loss). There must be evidence of the nature of the one-time extraordinary expense.

Add

Equals adjusted rental income.

Total

00,00.00

A9The number of months the property was in service (Step 1 Result).

Divide

00,00.00

Equals adjusted monthly rental income

Total

00,00.00

A10Enter PITIA (for non-subject property).

Subtract

Step 2A. Result:Monthly property cash flow:

Result

00,00.00

Step 2B. Lease Agreement

For each property complete ONLY 2A or 2B

This method is used in certain circumstances (e.g., when the property was acquired subsequent to the most recent tax filing or the lender has justification for using a lease agreement).

B1Enter the gross monthly rent (from the lease agreement) For multi-unit properties, combine the monthly qualifying income of all rental units.

Enter

B2The remaining 25% accounts for vacancy loss, maintenance, and management expenses.

Multiply

x.75

Equals adjusted monthly rents.

Total

00,00.00

B3 Enter proposed PITIA (for subject property) or existing PITIA (for non-subject property).

Subtract

Step 2B. Result: Monthly property cash flow:

Multiply

00,00.00

Step 3.

Determine qualifying impact of the mortgaged investment property PITIA expense.

If the result of Step 2A or 2B is negative, include this loss, not to exceed the monthly PITIA expense, in the debt-to-income ratio.

If the result of Step 2A or 2B is positive, the full amount of the PITIA expense has been offset. Do not include it in the debt-to-income ratio..

Important: This worksheet provides a means of calculating an offset to the monthly PITIA. To add any net income to the borrower’s qualifying income, additional requirements apply (e.g., two-year history vs. one-year history). Refer to the Self-Employment Income topic in the Selling Guide.

DU Data Entry

Monthly Income and Combined Housing Expenses

Mortgage Liabilities

Real Estate Owned

Non-Subject Property

Enter the amount of the negative monthly property cash flow in “Net Rental.” If the monthly property cash flow is positive, enter $0.00

Identify the mortgage as a rental property lien.

If REO Schedule is completed, confirm that the "Net Rental Income” field reflects either

 The amount of the property cash flow if it is negative, or

 $0.00 if the monthly property cash flow is positive.