Can You Use Rental Income to Qualify for a Mortgage?

Buying a home or investment property often raises the question: can rental income help you qualify for a mortgage? The answer is yes. In many cases lenders will count rental income toward your qualifying income, but how they count it depends on the loan program. This article explains how Conventional (Fannie Mae/Freddie Mac), FHA, and VA loans treat rental income. We’ll cover what counts as rental income, differences between projected (future) and existing rental income, how each program calculates it, documentation you’ll need, and some Arizona-specific considerations.

What Is Rental Income for Mortgage Qualification?

Rental income in mortgage terms is the money you earn from tenants that a lender can include as part of your gross income when assessing your loan application. Just like a salary or wages, verified rental income can boost your income on paper, potentially helping you qualify for a larger mortgage or to meet debt-to-income requirements. Lenders allow this because rent is a recurring source of income, but they typically won’t count 100% of it. They assume there will be periods of vacancy and expenses (repairs, maintenance, etc.), so most programs only count a portion (often 75%) of the gross rent to be safe​. The remaining 25% is effectively a cushion for potential vacancies and upkeep​.

Rental income can come from different scenarios, for example: renting out a property you already own, buying a new investment property that you plan to lease to tenants, or even renting out a unit in a multi-family home while you live in one unit (often called “house hacking”). In all cases, the income must be documented and likely to continue for it to count. Lenders will evaluate your history as a landlord (if any), the stability of the rental stream, and the characteristics of the property. It’s important to understand that not all rental income is treated equally. It depends on whether it’s existing proven rent or projected future rent. The tax year and when the income began also plays a role.

Using Rental Income with Conventional Loans (Fannie Mae and Freddie Mac)

Documentation– Leases and Appraisals

You will need to document the rental income. If it’s a current rental property you own, you should provide your tax returns (Schedule E) showing that rental income. If the property wasn’t rented the prior year or the tax return doesn’t show rental income yet, you can often use a current signed lease. However, most lenders will also order an appraisal with a rent schedule (known as a 1007) to verify market rent. When purchasing a new investment property, lenders typically require this appraisal, and having a signed lease with a future tenant strengthens your file. You may also need to show evidence of the tenant’s security deposit or first month’s rent paid (for a new lease) as proof the lease is solid.

Counting the Income vs. Offset

How the rental income is counted in your application depends on the situation: If the rental income is from your primary residence (for example, you’re buying a duplex, living in one unit and renting out the other), conventional guidelines say you can add rental income to help qualify, but if you don’t have a documented history as a landlord, they limit how much you can count. Fannie Mae allows rental income on a principal residence, but only up to the amount of the property’s monthly mortgage payment (PITIA). In effect, the rental income can offset your housing expense, but it can’t boost your qualifying income beyond that limit. This rule prevents an overly optimistic scenario of a first-timer claiming lots of rental income from their home.

If the rental property isn’t your primary residence, you can use the net rental income to offset its mortgage payment. If there’s leftover positive net income, you can add that to your qualifying income. On the other hand, if the property shows a net loss, the lender adds that loss to your monthly liabilities as if it were a debt payment. Since the mortgage payment is already included in the net calculation, lenders don’t count it again separately.

FHA Loan Guidelines for Rental Income

The Federal Housing Administration insures FHA loans, which are primarily intended for primary residences. FHA allows lower down payments (as little as 3.5%) and offers more flexible credit guidelines. However, to use rental income for qualifying, you’ll need to meet several specific requirements.

Rental Income from Multi-Unit Homes

FHA allows you to buy a 2-unit, 3-unit, or 4-unit property with an FHA loan as long as you occupy one of the units as your primary residence. In this case, you can use the potential rental income from the other unit(s) to help you qualify. For example, if you buy a duplex, you’ll live in one side and rent out the other – the rent from the other unit can be counted. FHA will typically take 75% of the projected rent from the rental units when calculating your income, similar to conventional rules.

“Boarder” or Roommate Income

A recent update, FHA announced in 2025 that they will permit income from boarders (renting out a room in your primary residence) to count in some cases. This is useful for multi-generational households or “house hacking” a single-family home. FHA’s 2025 guidance states that lenders can treat boarder income as effective income when the person has paid rent for at least 12 months and plans to continue doing so. There are additional requirements like credit score minimums and documentation of a written agreement and proof of rent payments and the ability to use could differ from lender to lender. This change signals FHA’s recognition of creative living arrangements, but it’s still a narrow allowance. For most borrowers, rental income will come from separate units or properties, not a roommate scenario.

Accessory Dwelling Units (ADUs)

In Arizona, it’s not uncommon for homes to have casitas or guest houses. FHA considers rent from an ADU (a second living unit on a single-family lot) slightly differently. If you don’t have a prior history of renting out the ADU (for example, it’s a new ADU or you’ve never leased it before), FHA will only let you use 50% of the fair market rent of that ADU to qualify​. This is an even more conservative approach than the standard 75%, acknowledging the higher uncertainty with new, small-scale rentals. So if your Phoenix home has a guest house you plan to rent, and you want to use that income under an FHA loan, be aware of this 50% limitation for first-time rental of an ADU​. There could be additional stipulations and requirements to use this income type.

VA Loan Guidelines for Rental Income

VA loans, guaranteed by the Department of Veterans Affairs, are available to eligible veterans and service members. This loan program requires no down payment and charge no monthly mortgage insurance, making them a strong option for home purchases. Eligible veterans can use VA loans to buy multi-unit properties (up to 4 units) as long as they occupy one of the units. When it comes to using rental income, VA has its own set of rules:

Existing Rental Properties (Not the Subject Property)

VA may count rental income from properties not tied to the new loan, but only if it’s stable and reliable.
This usually requires two years of tax returns and at least 3 months of PITI reserves for each rental.
If there’s little rental history, lenders decide case by case, based on the borrower’s experience and local market strength. New landlords may or may not qualify, depending on how easily the property can be rented and their background.

In Arizona, a community property state, VA and FHA lenders must include a non-borrowing spouse’s debts in your DTI. So if your spouse has a mortgage on a rental, that payment counts against you, even if they’re not on the loan. However, you can’t use their rental income to qualify, since their income isn’t part of the application. This can hurt VA borrowers with spouses who own separate rentals.
That said, if you as the veteran have rentals, VA’s flexible credit and residual income standards may offer some leeway. It’s a key nuance Arizona borrowers should understand.

Documentation Requirements for Rental Income

No matter the loan program, documentation is critical to count rental income. Be prepared to provide some or all of the following:

Lease Agreements

A signed lease is fundamental if you’re claiming rental income (projected or current). The lease should ideally be a 12-month lease to show stability. Lenders will want to see the rent amount. They may require proof that the tenant has paid a security deposit or first/last month rent. If the lease is new, you might need to show the check or electronic transfer for the deposit and initial rent. You might also need bank statements showing it deposited​.

Rental Income on Tax Returns

Lenders typically want two years of tax returns for existing rentals, though some programs may accept one year. They review Schedule E of your 1040, adding back non-cash expenses like depreciation and mortgage-related costs. Ensure your tax returns are complete with all schedules. If the property is in an LLC or S-Corp, you may need business returns.

Proof of Receipt of Rent

Having a lease isn’t enough, lenders want proof that the tenant pays rent on time. This could be in the form of bank statements, canceled rent checks, or electronic payment records. Commonly, lenders ask for the last two months of bank statements showing the rental deposit. If you’re self-managing, you might have your tenant pay directly to you – be ready to trace those deposits. If you use a property management company, their statements can be helpful too. The idea is to show the rent isn’t just theoretical – it’s coming in reliably.

In all cases, honesty and accuracy are crucial. This article doesn’t cover every detail. If you can document a strong rental history and show the income will continue, most lenders will include it.

Arizona-Specific Considerations

Arizona doesn’t have separate mortgage rules for rental income – the federal loan program guidelines apply here just as they do nationwide. However, there are a few points and local context to keep in mind for Arizona borrowers:

Community Property Implications

Arizona is a community property state. For FHA and VA loans, if you’re married, the lender considers your spouse’s financial obligations, even if they’re not on the loan. For example, if your spouse owns a rental property (or any property) with a mortgage, that monthly payment will count in your debt ratios for an FHA or VA loan in Arizona.

If that rental property is losing money each month, effectively it could reduce how much you qualify for. On the flip side, you generally cannot count a spouse’s income (including rental income) if the spouse isn’t on the loan. This is just something to be aware of: married borrowers in AZ using FHA/VA can’t fully silo their finances.

Conventional loans do not have this requirement – they will ignore a non-borrowing spouse’s debts and income. So, if you’re a veteran with a spouse who owns investment properties, it might be advantageous to consider a conventional loan to avoid their debts impacting your application. Each situation is unique. Discuss with your lender how community property laws might affect your DTI.

Prevalence of Rental Properties

Arizona – particularly the Phoenix metro area – has been a hotbed for rental property investment. In recent years, a significant share of homes in Phoenix were purchased by investors to use as rentals. For instance, at one point in 2021 about 1 in 4 homes sold in the Phoenix area went to investors, one of the highest rates in the country. While the market has evolved since then, many Arizonans either own a rental or are interested in doing so. Statewide, the housing mix includes many single-family rentals owned by “mom and pop” landlords. (Nationally about 70% of rental properties are owned by individual investors rather than corporations​, and Arizona aligns with this trend.) What this means for you as a borrower is that local lenders are very familiar with using rental income to qualify.

Arizona loan officers often work with clients buying second homes to rent out in popular areas or turning their former residence into a rental. Don’t hesitate to shop around for a lender who understands these scenarios. Especially if you’re doing something like purchasing a duplex in Phoenix’s Roosevelt Row or a home with a basement apartment in Tucson. An experienced loan officer can guide you through the specific verifications needed.

In Conclusion

Yes, you can use rental income to qualify for a mortgage and many borrowers do. It can offset a current payment or boost income for a new purchase. Conventional, FHA, and VA loans all allow it, though each has its own rules. In general, lenders count a portion of the rent to allow for vacancies. They also require documentation like leases and tax returns. They also favor borrowers with rental experience or a proven track record. Using rental income is common and individual investors are a major force in today’s housing market.

However, treat rental income realistically in your plans. Ask yourself: if a tenant leaves, can I cover the mortgage? Lenders are asking the same question, which is why they impose these guidelines. Understanding these rules lets you plan strategically. With the right prep and guidance, rental income can help you qualify and fast-track your long-term real estate goals.

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