Using Rental Income to Qualify for a Mortgage
The 75% rule · Last reviewed September 2026
The short version: lenders count 75% of gross rent, not all of it — the other 25% is held back for vacancy and repairs. That figure is then netted against the property's own PITIA. A surplus is added to your income; a shortfall is added to your debts, which hurts your debt-to-income ratio more than most people expect.
What a lender would count
Netted against the property
A surplus is added to your qualifying income, which improves your debt-to-income ratio.
An educational estimate of a standard conventional calculation. Lenders, loan programs, and documentation types vary — income shown on a tax return is treated differently from projected rent on a lease, and your own file may qualify differently. Confirm with a licensed loan officer.
How lenders calculate it
Three steps, in this order. First, take 75% of gross monthly rent. The 25% haircut — the vacancy-and-maintenance factor — exists because no rental stays occupied and perfectly maintained for thirty years, and the lender is underwriting all thirty.
Second, subtract the property's full PITIA: principal, interest, taxes, insurance, and any HOA or association dues. The rental has to carry itself before it can help you carry anything else.
Third — and this is the step that surprises people — look at the sign. A positive result is added to your qualifying income. A negative result is added to your monthly debts, not netted out of income. Because debt-to-income is a ratio, moving a shortfall to the numerator raises DTI more than removing the same amount from the denominator would.
What you'll be asked for
Which of these applies depends on whether the rental income already exists or is projected:
Federal tax returns (Schedule E)
Usually two years, for a property you already own. The lender adds back depreciation, mortgage interest, taxes, insurance and HOA before calculating.
Signed lease agreement
Proves the rent is real and current. Often required when a property was bought too recently to appear on a Schedule E.
Appraiser's rent schedule
Form 1007 for a single unit, Form 1025 for two-to-four units. Establishes market rent when there's no lease — this is how projected rent enters the file.
Bank statements showing rent deposits
Commonly two months, to corroborate that the lease is being paid as written.
When this doesn't work: DSCR loans
The 75% calculation runs through your debt-to-income ratio, so it has a ceiling. Investors who already own several properties, who are self-employed with heavily-deducted returns, or who lack the landlord history a program wants, often hit that ceiling regardless of how well the property performs.
A DSCR loan sidesteps it entirely by qualifying on the property's own debt-service coverage ratio rather than your personal income — no DTI calculation, and typically no tax returns. It usually costs more in rate and down payment, which is the trade. DSCR vs conventional compares the two directly, and the DSCR calculator shows whether a property clears the usual 1.20 threshold.
Frequently asked questions
Can I use rental income to qualify for a mortgage?
Usually yes, but lenders won't count all of it. Conventional underwriting applies a vacancy-and-maintenance factor — 75% is the long-standing convention — and then nets that against the property's own principal, interest, taxes, insurance and HOA dues. What's left is either added to your qualifying income or, if the property runs short, added to your monthly debts.
What is the 75% rule for rental income?
Lenders count 75% of gross rent rather than the full amount, holding back 25% for vacancy, repairs and turnover. On $2,000 of monthly rent, $1,500 is the figure that enters the calculation. The haircut exists because a lender is underwriting a property that will not be occupied and paying every month for the life of the loan.
How much rental income can be used for mortgage qualification?
Take 75% of gross monthly rent, then subtract the property's full PITIA — principal, interest, taxes, insurance and any HOA dues. A property renting at $2,400 with a $1,502 PITIA contributes 2,400 × 0.75 = $1,800, less $1,502, for $298 of added qualifying income. The same property renting at $1,800 with a $1,970 PITIA produces a $620 shortfall instead.
What happens if the rental doesn't cover its mortgage?
The shortfall is added to your monthly debt obligations rather than subtracted from your income. That's a meaningful difference: adding $620 to the debt side of a debt-to-income ratio raises DTI more than removing $620 from the income side would. A negative-cash-flow rental can therefore reduce how much you're able to borrow on your next purchase.
Can I use projected rental income on a property I haven't bought yet?
Often yes, for an investment property purchase, using an appraiser's rent schedule (Form 1007 or 1025) to establish market rent. The same 75% factor applies. Rules are stricter when the rental income comes from a departing primary residence, and some programs require reserves or a documented history instead. This is one to confirm with your loan officer before you rely on it.
Do I need two years of landlord experience?
It depends on the program and the documentation. Some conventional scenarios allow projected rent with no prior landlord history, while others want rental income to appear on two years of tax returns. Where experience is required and you don't have it, a DSCR loan is the usual alternative — it qualifies on the property's own coverage ratio instead of your personal income.
Check the property itself
Qualifying is half the question — whether the deal works is the other half.
Open the Rental Property Calculator →