Freddie Mac Single-Family Seller/Servicer Guide §5306.1 — Rental income (04/12/26)
Freddie Mac Guide §5306.1 (Rental income). Gap-fill (verbatim, ID-diff).
Verbatim regulatory text
Verbatim provisions from Freddie Mac Single-Family Seller/Servicer Guide §5306.1 — Rental income (04/12/26) — each quote is a verified substring of the regulator-published source snapshot, not retyped. Quoted for reference; this is not legal advice. The operational layer (P&P updates, prompts) lives in the regulation update kits.
Freddie Mac Guide 5306.1
Refer to Bulletin 2025-7, which announced the policy requirements for Uniform Appraisal Dataset (UAD) 3.6. Sellers may submit to the Uniform Collateral Data Portal® appraisal reports that use UAD 3.6 before the mandatory effective November 2, 2026 version of this section. This section contains requirements and guidance for the calculation, documentation, analysis, history and determination of stable monthly net rental income when used to qualify the Borrower. ■ General eligibility requirements ■ Rental income from subject 1- to 4-unit Investment Property ■ Rental income from non-subject investment property ■ Rental income from conversion of a Primary Residence to an Investment Property ■ Rental income from subject 2- to 4-unit Primary Residence ■ Rental income from non-subject 2- to 4-unit Primary Residence ■ Rental income from an ADU on a subject 1-unit Primary Residence ■ Rental income from a live-in aide residing in a 1-unit Primary Residence ■ Other provisions related to rental income (a) General eligibility requirements Stable monthly rental income must be generated from acceptable and verifiable sources and must be reasonably expected to continue for at least the next three years. For each income source used to qualify the Borrower, the Seller must determine that both the source and the amount of the income are stable. Refer to Section 5301.1 for additional information about income stability and continuance. (i) Rental income eligibility Rental income generated from the following property and occupancy types may be considered when determining the stable monthly income:
Freddie Mac Guide 5306.1
306-2 ■ 1-unit Primary Residence: ❑ Rental income from a live-in aide, regardless of the type of housing provided, or ❑ Rental income from an ADU ■ 2- to 4-unit Primary Residence (rental income is eligible from units that are not occupied by the Borrower) ■ Subject 1- to 4-unit Investment Property ■ Non-subject investment property owned by the Borrower (not restricted to residential property (e.g., commercial permitted)) Rental income generated from the Borrower’s second home may not be used as stable monthly income. (ii) Rental income generated from ADUs When determining stable monthly income, rental income generated from an ADU may be considered for: ■ Subject 1-unit Primary Residence ■ Subject 1-unit Investment Property In addition, rental income generated from one or more ADUs on a non-subject investment property may be considered when determining stable monthly income. Note: Refer to Section 5306.1(g) below for requirements related to rental income eligibility for a 1-unit Primary Residence with an ADU. Refer to Section 4501.6(b) for requirements related to rental income eligibility for a 1-unit Primary Residence with an ADU for Home Possible® Mortgages. Note: Refer to Section 5601.2 for the property eligibility and appraisal requirements related to the subject property with an ADU. (b) Rental income from subject 1- to 4-unit Investment Property (i) Eligibility Rental income generated from a subject 1- to 4-unit Investment Property is eligible for use in qualifying the Borrower provided it meets the requirements of this subsection (b). (ii) Rental income documentation and calculation requirements
Freddie Mac Guide 5306.1
306-3 The following tables contain requirements for establishing net rental income from the subject 1- to 4-unit Investment Property. Rental income from subject 1- to 4-unit Investment Property Purchase transaction Mortgage Topic Requirements Income documentation ■ The existing lease, when available ❑ The Seller must make reasonable efforts to determine lease availability, including review of the appraisal report, comparable rent data, purchase contract, a discussion with the Borrower and/or any other applicable and reasonable method ❑ The existing lease(s) must be current and fully executed in the property seller’s name as the landlord ■ Form 72, Small Residential Income Property Appraisal Report, or Form 1000, Single-Family Comparable Rent Schedule, as applicable Comparable rent data analysis when using Forms 72 and 1000 The Seller’s analysis of the rental information must include, at a minimum, the following factors: ■ Rental market viability and income producing potential for subject property ■ When using the lease, whether the current market rents reasonably support the gross monthly lease income. If the current market rents do not reasonably support the gross monthly lease income, the Seller must: ❑ Determine if additional documentation is necessary to support income stability, and ❑ Provide a written analysis explaining the discrepancy and justifying the determination that the rental income used to qualify the Borrower is stable and reasonably expected to continue
Freddie Mac Guide 5306.1
306-4 Rental income from subject 1- to 4-unit Investment Property Purchase transaction Mortgage Topic Requirements Calculation Use 75% of: ■ Gross monthly rent from the lease when the lease is available, or ■ Gross monthly market rent from Form 72 or Form 1000, as applicable, when the lease is not available Note: The 25% adjustment is made to compensate for vacancies, operating and maintenance costs and any other unexpected expenses. Limitations on use of rental income To use rental income to qualify: ■ Each Borrower must currently own a Primary Residence or have a current rental housing payment documented in accordance with Section 5401.1(d). Exception: For Borrowers currently residing in the same property, at least one Borrower must own a Primary Residence or have a current rental housing payment to use rental income to qualify. ■ The full amount of the net rental income can be used only when documentation in the Mortgage file demonstrates that at least one Borrower has a minimum of one year of investment property management experience ■ If no Borrower has at least one year of investment property management experience, net rental income is limited to the amount that offsets the principal, interest, taxes and insurance (PITI) and, when applicable, mortgage insurance premiums, leasehold payments, homeowners association (HOA) dues (excluding unit utility charges) and payments on secondary financing on the subject Investment Property. Use of net rental income in the debt payment-to- income (DTI) calculation Subtract the monthly payment amount (as described in Section 5401.2(b)(8)) from the net rental income: ■ If the result is positive, add it to the stable monthly income ■ If the result is negative, add it to the monthly liabilities
Freddie Mac Guide 5306.1
306-5 Rental income from subject 1- to 4-unit Investment Property purchased or placed in service in the current calendar year Refinance Mortgage Topic Requirements Income documentation ■ Purchase date or conversion date, as applicable, must be documented ■ Form 72 or Form 1000, as applicable ■ Lease ❑ The lease must be current and fully executed ❑ For newly executed leases, the first rental payment due date must be no later than the first payment due date of the subject Mortgage ■ Income reflected on the lease must be supported by one of the following: ❑ Form 72 or Form 1000, as applicable ❑ Documentation verifying receipt of two months of rental payments or receipt of the security deposit and the first month’s rental payment. Documentation must include one of the following: ■ Evidence that the payments were cashed or deposited into the Borrower’s depository account at a financial institution (e.g., bank statements evidencing deposit or canceled checks) ■ Evidence that the payments were transferred into a third-party money transfer application account that is owned by the Borrower (e.g., a screenshot or monthly account statement evidencing transfer of the payments and the Borrower’s name, a screenshot that evidences transfer of the payments and ties the account to the Borrowers bank account) ■ For security deposits, evidence of deposit into an escrow or business account established for this purpose, or evidence payment was cashed or deposited into the Borrower’s personal depository account at a financial institution Comparable rent data analysis when The Seller’s analysis of the rental information must include, at a minimum, the following factors:
Freddie Mac Guide 5306.1
306-6 Rental income from subject 1- to 4-unit Investment Property purchased or placed in service in the current calendar year Refinance Mortgage Topic Requirements using Forms 72 and 1000 ■ Rental market viability and income producing potential for subject property ■ When using the lease, whether the current market rents reasonably support the gross monthly lease income. If the current market rents do not reasonably support the gross monthly lease income, the Seller must: ❑ Determine if additional documentation is necessary to support income stability, and ❑ Provide a written analysis explaining the discrepancy and justifying the determination that the rental income used to qualify the Borrower is stable and reasonably expected to continue Calculation Use 75% of the gross monthly rent from the lease. Note: The 25% adjustment is made to compensate for vacancies, operating and maintenance costs and any other unexpected expenses. Use of net rental income in the DTI calculation Subtract the monthly payment amount (as described in Section 5401.2(b)(8)) from the net rental income: ■ If the result is positive, add it to the stable monthly income ■ If the result is negative, add it to the monthly liabilities Rental income from subject 1- to 4-unit Investment Property owned in the prior calendar year Refinance Mortgage Topic Requirements Income documentation ■ The Borrower’s complete federal income tax returns (Internal Revenue Service (IRS) Form 1040), including Schedule E for the most recent year as described in Section 5302.4(b). ■ Form 72 or Form 1000, as applicable
Freddie Mac Guide 5306.1
306-7 Rental income from subject 1- to 4-unit Investment Property owned in the prior calendar year Refinance Mortgage Topic Requirements ■ If the property was purchased or converted to a rental property in the prior calendar year, the purchase or conversion date, as applicable, must be documented. When the requirements are met for using a lease in lieu of Schedule E to calculate net rental income as described in the row labeled “Calculation of net rental income using lease”, the following additional documentation is required: ■ Lease ❑ The lease must be current and fully executed ❑ For newly executed leases, the first rental payment due date must be no later than the first payment due date of the subject Mortgage ■ Income reflected on the lease must be supported by one of the following: ❑ Form 72 or Form 1000, as applicable ❑ Documentation verifying receipt of two months of rental payments or receipt of the security deposit and the first month’s rental payment. Documentation must include one of the following: ■ Evidence that the payments were cashed or deposited into the Borrower’s depository account at a financial institution (e.g., bank statements evidencing deposit or canceled checks) ■ Evidence that the payments were transferred into a third-party money transfer application account that is owned by the Borrower (e.g., a screenshot or monthly account statement evidencing transfer of the payments and the Borrower’s name, a screenshot that evidences transfer of the payments and ties the account to the Borrowers bank account) ■ For security deposits, evidence of deposit into an escrow or business account established for this purpose, or evidence payment was cashed or deposited into the Borrower’s personal depository account at a financial institution
Freddie Mac Guide 5306.1
306-8 Rental income from subject 1- to 4-unit Investment Property owned in the prior calendar year Refinance Mortgage Topic Requirements Comparable rent data analysis when using Forms 72 and 1000 The Seller’s analysis of the rental information must include, at a minimum, the following factors: ■ Rental market viability and income producing potential for subject property ■ Whether the current market rents reasonably support the gross rents reported on Schedule E or the gross monthly lease income, as applicable. If the current market rents do not reasonably support the gross rents reported on Schedule E or the gross monthly lease income, the Seller must: ❑ Determine if additional documentation is necessary to support income stability, and ❑ Provide a written analysis explaining the discrepancy and justifying the determination that the rental income used to qualify the Borrower is stable and reasonably expected to continue Calculation of net rental income using Schedule E Net rental income must be calculated using Schedule E except when the requirements to use a lease as described in the row labeled “Calculation of net rental income using lease” are met. Step 1: Calculate the total net rental income from Schedule E by deducting expenses from rents received. The following expenses may be added back: ■ Insurance ■ Mortgage interest paid to banks, etc. ■ Real estate taxes ■ HOA dues ■ Depreciation and/or depletion ■ One-time losses (e.g., casualty loss) if documented ■ Non-cash deduction (e.g., amortization) Use Form 92, Net Rental Income Calculations – Schedule E, or similar alternative form.
Freddie Mac Guide 5306.1
306-9 Rental income from subject 1- to 4-unit Investment Property owned in the prior calendar year Refinance Mortgage Topic Requirements Step 2: Determine the applicable number of months for averaging as follows: ■ If the property was owned as a rental property during the entire calendar year, the rental income used in qualifying must be annualized by dividing by 12. Exception: The qualifying income may be established based on the number of days in service on Schedule E, provided that the property was out of service for a period of time in the prior year, and the Mortgage file contains documentation of significant repairs or renovation, as supported by a reduced number of days in use and repair/renovation expenses on Schedule E. ■ If the property was purchased or converted to a rental property later in the prior calendar year, the rental income used for qualifying must be based on the purchase or conversion date, as applicable. Exception: The qualifying income may be established based on the number of days in service on Schedule E, provided that the property was out of service for a period of time after the purchase or conversion, as applicable, and the Mortgage file contains documentation of significant repairs or renovation, as supported by a reduced number of days in use and repair/renovation expenses on Schedule E. Step 3: Calculate the qualifying monthly net rental income as follows: Divide the total net rental income calculated in Step 1 by the applicable number of months determined in Step 2. Calculation of net rental income using lease Lease may be used to calculate the net rental income only when either of the following applies: ■ The most recent tax return filed with the IRS does not include the subject property on Schedule E (e.g., the tax return for the year during which the property was purchased or converted is on extension) ■ The property was out of service for a period of time during the prior year, and the Mortgage file contains documentation of significant repairs or renovation, as supported by a
Freddie Mac Guide 5306.1
306-10 Rental income from subject 1- to 4-unit Investment Property owned in the prior calendar year Refinance Mortgage Topic Requirements reduced number of days in use and repair/renovation expenses on Schedule E Use 75% of the gross monthly rent from the lease. Note: The 25% adjustment is made to compensate for vacancies, operating and maintenance costs and any other unexpected expenses. Use of net rental income in the DTI calculation Subtract the monthly payment amount (as described in Section 5401.2(b)(8)) from the net rental income: ■ If the result is positive, add it to the stable monthly income ■ If the result is negative, add it to the monthly liabilities (c) Rental income from non-subject investment property (i) Eligibility Rental income generated from non-subject investment property is eligible provided it meets the requirements of this subsection (c). (ii) Rental income documentation and calculation requirements The following tables contain requirements for establishing net rental income from a non- subject investment property. Rental income from non-subject investment property purchased or placed in service in the current calendar year Topic Requirements Income documentation ■ Purchase date or conversion date, as applicable, must be documented ■ Lease ❑ The lease must be current and fully executed ❑ For newly executed leases, the first rental payment due date must be no later than the first payment due date of the subject Mortgage