B3-3.8-03, Rental Income from the Subject Property: Short-Term Rental (09/02/2026)

The following properties are eligible:

• One-unit investment properties only.
• The property must be legally permitted to operate as a short-term rental, including compliance with all applicable local registration and licensing requirements.
• Short-term rental income cannot be derived from an ADU.

The lender must document a current housing payment to use any rental income from the subject property in qualifying.¹

Purchase:

• The Single-Family Comparable Rent Schedule ( Form 1007) must be completed based on standard long-term rentals, or
• The lender must obtain validated rental data for other short-term rentals from 
  • Multiple Listing Service (MLS), or
  • property management companies.

Validated rental data must include:

• three comparable short-term rental properties. Comparable rental properties should be from within the same market area (including subdivision or project) as the subject property, when possible;
• daily, weekly, and/or monthly rental rates for these comparables; 
• number of days rented in the last calendar year; and
• relevant factors that could impact the property's use as a short-term rental, if applicable.

The lender must retain all documentation used to determine monthly market rents in the loan file.

Refinance:

• The most recent individual federal income tax return (IRS Form 1040), which include Schedules 1 and E, regardless of whether the subject property is listed on the tax return.
• If the subject property is not yet reported on the most recent individual federal income tax return (IRS Form 1040), the lender must also obtain the following:
  • Form 1007 completed based on standard long-term rentals, or
  • validated rental data for other short-term rentals from
    • Multiple Listing Service (MLS), or
    • property management companies.

Validated rental data must include:

• three comparable short-term rental properties. Comparable rental properties should be from within the same market area (including subdivision or project) as the subject property, when possible;
• daily, weekly, and/or monthly rental rates for these comparables; 
• number of days rented in the last calendar year; and
• any relevant factors that could impact the property's use as a short-term rental, if applicable.

Purchase:

To determine adjusted net rental income (ANRI), the lender must select either

• the monthly market rent established by Form 1007, or
• the validated market rental rates obtained by third party sources.

To complete the calculation, the lender must

• multiply the monthly gross rental amount by 50% to determine the net rental income,² then
• subtract the PITIA. 
• (The remaining 50% accounts for vacancy losses and maintenance expenses.)

Note: To determine the monthly market rent for the validated rental data, the lender must 

• average the daily, weekly, or monthly rental rate from the three comparables, and
• multiply it by the average number of days rented from the same comparables.

Example: 

Form 1007 or third-party validated market rental rate x .50 = Net Rental Income

Net Rental Income - PITIA = ANRI

If ANRI is positive, the lender may use the rental income to offset the PITIA only.³

If ANRI is negative, the lender must include the amount in the DTI ratio.³

Refinance:

To determine adjusted net rental income (ANRI)

• If the subject property is reported on Schedule E of the most recent individual federal income tax return (IRS Form 1040), the lender must
  • calculate net rental income by performing a cash flow analysis³ using Schedule E, 
  • average the results over 12 months, then
  • subtract the PITIA of the subject property.
• If the subject property is not reported on Schedule E of the most recent individual federal income tax return (IRS Form 1040), the lender must
  • multiply the monthly gross rental amount by 50%,² then
  • subtract the PITIA of the property.

Note: To determine the monthly market rent for the validated rental data, the lender must 

• average the daily, weekly, or monthly rental rate from the three comparables, and
• multiply it by the average number of days rented from the same comparables.

If ANRI is positive, the lender may use the rental income to offset the PITIA only.³

If ANRI is negative, the lender must include the amount in the DTI ratio.³

Note: Cashflow of the subject property equals the net amount on Schedule E plus any depreciation, interest, homeowners' association dues, taxes, or insurance expenses divided by the number of months as noted above. The lender may add back non-recurring property expenses, if documented accordingly.