Homebuyer Education & Rental Income

Fannie Mae – Homebuyer Education & Rental Income

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Homebuyer Education Requirements

Fannie Mae requires that at least one borrower complete a qualifying homeownership education program under certain conditions. The education must be delivered by a provider that aligns with the National Industry Standards (NIS) for Homeownership Education and Counseling or by a HUD-approved counseling agency.

Fannie Mae also offers its HomeView® online course at no cost, and completion of that course satisfies the education requirement.

At least one Borrower must complete Homebuyer Education for the following transactions:

  • If all borrowers are using nontraditional credit (i.e., no credit score history, or similar alternative credit documentation) to qualify.
  • For HomeReady purchase transactions when all occupying borrowers are first-time homebuyers (regardless of LTV).
  • Whenever all borrowers in a purchase transaction are first-time homebuyers and the LTV exceeds 95%.
  • Note: Borrowers who complete housing counseling (through a HUD-approved agency, evidenced by Form 1017 or equivalent) may waive the homeownership education requirement.

Rental Income Property

Fannie Mae’s rules around using rental income to qualify borrowers have become more refined. The guidelines distinguish between rental income from the subject property and non-subject properties and place conditions on when and how much rental income a borrower can use.

Eligible Properties

  • 2–4 unit principal residence (borrower occupies one unit)
  • 1–4 unit investment property

Documentation

  • Tax returns (Schedule E), OR
  • Lease + appraisal rent schedule (Forms 1007/1025)
  • Standard: use 75% of gross rent

Borrower Requirements:

  • If the borrower owns a principal residence (or has a current housing expense) and has at least one year of rental income history or documented property management experience:
    • Full rental income (per documentation) may be used with no restriction.
  • If the borrower does not own a principal residence and has no current housing expense:
    • Rental income from the subject property cannot be used to qualify.

Additional Limitations:

  • For a principal residence (2–4 unit): rental income may not exceed the subject property’s PITIA when added to gross income.
  • For an investment property: rental income may be used only to offset the subject property’s PITIA in certain cases.
  • Rental income from second homes or short-term rentals generally cannot be used (with limited exceptions such as boarder or accessory unit income under HomeReady).

This policy does not apply to HomeReady loans with rental income from an accessory unit.

Questions? Contact a local GMFS Mortgage Loan Officer to help you through the process of homeownership!