Freddie Mac has made some changes to the way in which lenders must handle rental income. The changes are primarily aimed at determining the stability of that income, especially when it is short term and does not involve a lease. The changes apply to loans with settlement dates on or after February 9, 2018, but sellers can, if they wish, implement them in their entirety immediately.
The company says the changes to rental income requirements reflect changes in the rental market such as short-term rental income and are intended to support the determination of stability, calculation of rental income, and a reasonable expectation that rental income will continue.
A loan used to purchase or refinance the subject property, or a non-subject property, which was not owned in the prior calendar year requires considering net rental income only up to a limit of 30 percent of the total of that net rental income plus all other stable monthly income used to qualify the borrower. The exception would be a borrower who has a documented history of investment property management experience of at least one year. The change, Freddie says, is to “provide support to sustainable and successful home ownership by requiring a reasonable limitation upon the reliance on a newer type of income stream.”
VIA MortgageNewsDaily: Short-Term Rental Income Calculations Changed