Let’s say you own and live in House A. You find House B, which will become your new primary residence. Rather than sell House A, you want to keep it and rent it out. For mortgage qualifying purposes, House A is called a departing residence.

The big question is whether you can use rent from House A to help qualify for the payment on House B. This has always been a major issue for move-up buyers, because carrying two full housing payments can push a debt-to-income ratio too high. Fannie Mae’s updated departing residence rental income guidelines for 2026 matter because they clarify how that potential rent must be documented and used.

What changed with Fannie Mae departing residence rental income?

Under the updated Fannie Mae approach, the lender establishes market rent for the departing residence using an acceptable market-rent analysis. For a one-unit property, that commonly means a Single-Family Comparable Rent Schedule, known as Form 1007. For a two- to four-unit property, the applicable appraisal report may include Form 1025 rental information.

Here’s the important change: a signed lease is not the document that establishes market rent for a departing residence under the new Fannie Mae rental income guidelines. A borrower may have a tenant ready to sign, or may already have a lease. That can still be relevant loan documentation. But the lender needs acceptable market-rent support rather than simply relying on a proposed lease amount.

This is a pretty meaningful change. It puts the focus on what the property can reasonably rent for in the current market, supported by rental comparables, instead of treating a lease as the starting point for qualification.

Individual lenders can add their own overlays. For example, a lender may still ask for a signed lease, proof of a security deposit, extra appraisal support, or more reserves. Those are lender requirements, not necessarily Fannie Mae’s baseline rule. That is why it helps to have the scenario reviewed early rather than assuming every conventional lender handles it identically.

How does the Fannie Mae 75 percent rental income calculation work?

Fannie Mae generally uses 75% of documented gross market rent when a borrower will convert a primary residence to a rental. The 25% reduction is intended to account for vacancy and ongoing maintenance. The math matters because lenders do not simply subtract the full expected rent from the old mortgage payment.

That 75% figure is compared with the departing residence’s qualifying housing expense, often called PITIA. PITIA means principal, interest, property taxes, homeowners insurance, applicable homeowners association dues, and other required housing expenses.

Let’s say the documented market rent for House A is $4,500 per month. Seventy-five percent of $4,500 is $3,375. If House A’s PITIA is $3,000, the calculation produces a $375 positive result.

For a borrower without the required rental history or documented property-management experience, that positive amount is not simply added to regular qualifying income. Instead, Fannie Mae limits the rental income to offsetting the departing residence’s housing obligation. In this example, the $3,375 qualifying rent fully offsets the $3,000 PITIA. The extra $375 does not become additional income for debt-to-income purposes.

Now change the numbers. If market rent is $3,600, 75% is $2,700. If PITIA is $3,000, there is a $300 shortfall. That $300 is treated as a monthly housing expense in the borrower’s debt-to-income ratio. In plain English, the rent does not quite cover the old home’s qualifying payment, so the borrower must be able to carry that difference while qualifying for the new home.

When can positive rental income count beyond the old payment?

The borrower’s experience matters. Fannie Mae distinguishes between someone who has already demonstrated rental-property management experience and someone becoming a landlord for the first time.

If a borrower has at least 12 months of documented property-management experience, rental income from a departing residence may be treated under Fannie Mae’s standard rental-income rules. Depending on the complete file and tax-return history, net rental income may be used as qualifying income or a rental loss may be counted against income.

If the borrower has less than 12 months of documented property-management experience, Fannie Mae’s more restrictive departing-residence treatment applies. The qualifying rental income can offset the departing residence PITIA, but it cannot create extra monthly income beyond that payment. This is where many online explanations get it wrong.

It also helps to remember that mortgage approval is bigger than one calculation. Income, credit, debt, assets, and the property itself all work together in underwriting. A strong rent schedule does not override a weak overall file.

What reserve requirement applies to a departing residence?

For a borrower using rental income from a departing residence without at least one year of documented property-management experience, Fannie Mae requires six months of reserves for that property. Reserves are liquid or near-liquid assets left after closing, measured in months of the property’s PITIA.

Let’s say House A has a PITIA of $3,000 per month. Six months of reserves would equal $18,000. Those funds are separate from the down payment, closing costs, and any required funds for the new purchase.

There may also be additional reserve requirements when a borrower owns other financed properties. So a buyer can have enough income to qualify and still need a meaningful amount of assets after closing. This is one reason a quick preapproval based only on income can be misleading for someone planning to rent their current house and buy another.

Can you buy another house and rent your current home?

You may not necessarily have to sell your current house to buy the next one. If you meet Fannie Mae departing residence guidelines, qualifying rental income may offset some or all of the existing home’s housing obligation. That can make a non-contingent purchase more realistic for some homeowners. For more on the larger purchase strategy, see how buying before selling can work.

Here’s where this gets real: qualifying to keep the house and deciding whether you should keep the house are two different conversations. A lender can approve a scenario that may not be the best fit for your cash flow or long-term plans.

Before keeping House A, look beyond the underwriting rent figure. Consider actual expected rent, vacancy, repairs, maintenance, landlord insurance, property management, taxes, tenant turnover, and your comfort with the responsibility. The 25% reduction used in mortgage qualifying is not a personal cash-flow budget.

Bottom line: do not automatically assume you must qualify while carrying both full mortgage payments. But do not assume projected rent will solve every qualification issue either. Run the market-rent analysis, 75% calculation, reserves, and complete debt-to-income picture before writing an offer on the next house.

Guidelines can change, and individual lenders may impose additional requirements. Loan approval depends on the borrower’s complete financial profile, the property, available documentation, and applicable underwriting requirements at the time of review.

If you are considering keeping your current Sonoma County home as a rental while buying your next primary residence, it is worth reviewing the numbers before deciding whether to sell or retain it. I can help you look at the rent analysis, payment offset, reserve needs, and the rest of the loan picture. Get a free mortgage rate quote today.