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Individual Rental Income from Investment Property(s): Monthly Qualifying Rental Income (or Loss)Documentation Required:  EnterInvestment Property AddressInvestment Property AddressInvestment Property AddressInvestment Property Address§  Schedule E (IRS Form 1040) OR  §  Lease Agreement or Fannie Mae Form 1007 or Form 1025Step 1.  When using Schedule E, determine the number of months the property was in service by dividing the Fair Rental Days by 30.  If Fair Rental Days are not reported, the property is considered to be in service for 12 months unless there is evidence of a shorter term of service.Step 1.  Result:  Enter the number of months the property was in service:ResultStep 2.  Calculate monthly qualifying rental income (loss) using Step 2A:  Schedule E OR Step 2B:  Lease Agreement or Fannie Mae Form 1007 or Form 1025.Step 2A.   Schedule E - Part I                 For each property complete ONLY 2A or 2BA1Enter total rents received. EnterA2Enter total expenses.SubtractA3Enter insurance expense.AddA4Enter mortgage interest paid. AddA5Enter tax expense.AddA6Enter homeowners’ association dues. AddThis expense must be specifically identified on Schedule E in order to add it back. A7Enter depreciation expense or depletion. AddA8Enter any one-time extraordinary expense (e.g., casualty loss). There must be evidence of the nature of the one-time extraordinary expense.AddEquals adjusted rental income. Total=SUM(F11,F13:F19)-F12=SUM(G11,G13:G19)-G12=SUM(H11,H13:H19)-H12=SUM(I11,I13:I19)-I12A9Enter the number of months the property was in service (Step 1 Result). Divide=F8=G8=H8=I8Equals adjusted monthly rental incomeTotal=IF(F21=0,0,F20/F21)=IF(G21=0,0,G20/G21)=IF(H21=0,0,H20/H21)=IF(I21=0,0,I20/I21)A10Enter proposed PITIA (for subject property) or Subtractexisting PITIA (for non-subject property).Step 2A.  Result:  Monthly qualifying rental income (or loss):Result=F22-F23=G22-G23=H22-H23=I22-I23Step 2B.  Lease Agreement OR Fannie Mae Form 1007 or Form 1025  For each property complete ONLY 2A or 2BThis method is used when the transaction is a purchase, the property was acquired subsequent to the most recent tax filing, or the lender has justification for using a lease agreement.B1Enter the gross monthly rent (from the lease agreement) or Entermarket rent (reported on Form 1007 or Form 1025).  For multi-unit properties, combine gross rent from all rental units.         B2The remaining 25% accounts for vacancy loss, maintenance, and management expenses.      Multiplyx.75x.75x.75x.75Equals adjusted monthly rental income.Total=F28*0.75=G28*0.75=H28*0.75=I28*0.75B3Enter proposed PITIA (for subject property) or existing PITIA (for non-subject property).Subtract Step 2B.  Result:  Monthly qualifying rental income (loss):Result=F32-F33=G32-G33=H32-H33=I32-I33Step 3.   Determine the qualifying impact using the result of Step 2A or Step 2B.     If the result of Step 2A or 2B is positive, add the positive amount to the borrower’s monthly qualifying income. Because the PITIA expense was included in the calculations above, do not add it to the debt-to-income (DTI) ratio.=IF(SUM(F25:I25,F34:I34)>0,SUM(F25:I25,F34:I34),"")If the result of Step 2A or 2B is negative, include the amount of the loss in the borrower’s monthly expenses when calculating the DTI ratio.=IF(SUM(F25:I25,F34:I34)<0,SUM(F25:I25,F34:I34),"")DU Data EntryMonthly Income and Combined Housing ExpensesMortgage LiabilitiesSubject Property Enter the amount of the monthly qualifying income (positive result) or monthly qualifying loss (negative result) in “Subject Net Cash.” For refinance transactions, identify the mortgage as a subject property lien.Non-Subject PropertyEnter the amount of the monthly qualifying income (positive result) or monthly qualifying loss (negative result) in “Net Rental.”  Identify the mortgage as a rental property lien.Refer to the Rental Income topic in the Selling Guide for additional guidance.

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