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Rental income / departing residence

Last updated: October 19, 2026
 

CURRENT RULE

For Fannie Mae applications dated on or after Dec 1, 2026 (SEL-2026-08): when the borrower buys a new primary and keeps the old home as a rental, a signed lease cannot be used to set the qualifying rent. Use market rent from the appraisal, Form 1007, or a market tool with at least 3 similar rentals. Take 75% of market rent, subtract the old home’s full PITIA payment. A positive remainder only offsets that home’s payment — unless the borrower has 12 months of landlord history on tax returns, in which case it counts as income. Reserves trap: borrowers without 12 months of landlord history need 6 extra months of departing-home PITIA in reserves. Move-up buyer trap: departing PITIA $3,200 vs $3,000 market rent = $950/mo DTI shortfall (75% × $3,000 = $2,250 vs $3,200 PITIA); reserves on that example = $19,200. Short-term rental rules and non-arm’s-length lease restrictions also tightened.

Lenders adopting the Dec 1 rules early:

  • Averra adopted for DU loans Oct 15 (Memo 2026-076); Nations Direct similar; Kind briefed brokers Oct 19.
  • Averra market-rent documentation options: an MLS report with 3+ comps, or a Zillow Rent Zestimate Report PDF (same property type/bedrooms, 3+ comps).
  • ADU rent: one existing ADU’s rent can count on a purchase or limited cash-out refi only, capped at 30% of total qualifying income.
  • Short-term rentals: OK if legally permitted; qualify off the long-term 1007 rent.
  • New leases (signed within 2 months of application) on properties not on the last tax return: 6+ month term, first rent due by the first mortgage payment, and the tenant can’t be family or a party to the deal.

KEY DATES

  • Dec 1, 2026: new rules mandatory (application date controls).
  • Before Dec 1: lenders may use old or new rules. Confirm with your lender.
  • Oct 15, 2026: Averra adopted the new rules early for DU loans (Memo 2026-076); Nations Direct similar; Kind briefed brokers Oct 19.

“

Fannie changed how rental income works on the home you’re leaving. We can’t use your lease anymore. We’ll use market rent and run the new math together.

DON’T MESS UP

  • Stop telling people “Nov 1.” Some lender guides still say Nov 1. Ask which rule set the lender uses.
  • The application date is what counts, not the closing date.
  • Nations Direct overlay: they run Rentometer themselves (min 3 comps). Positive rent only offsets PITIA unless 12-month landlord history is on the tax returns. No landlord history means 6 extra months PITIA in reserves.
  • New lease signed within 2 months of application (property not on last tax return): 6+ month term, first rent due by first mortgage payment, tenant not family or a party to the deal.

OFFICIAL SOURCES

Fannie SEL-2026-08 (updated Sep 23, 2026)

CHANGE HISTORY

  • Sep 14, 2026: first covered in the weekly alert (then slated for Nov 1).
  • Sep 23, 2026: Fannie reissued SEL-2026-08; mandatory date moved to Dec 1.
  • Sep 28, 2026: weekly alert flagged the date move.
  • Oct 5, 2026: deep dive in the October roll-up.
  • Oct 5, 2026: CURRENT RULE box updated — reserves trap spelled out (6 extra months PITIA without 12-month landlord history) and move-up buyer trap worked example added.
  • Oct 19, 2026: early adopters noted (Averra for DU loans Oct 15, Memo 2026-076; Nations Direct similar; Kind briefed brokers Oct 19); Averra market-rent doc options added (MLS report with 3+ comps, or Zillow Rent Zestimate Report PDF); ADU rent rule, short-term rental rule, and new-lease rule added to CURRENT RULE box.

Part of the GTG LO Library. Confirm the current rule with your lender before quoting.