Fannie Mae Just Changed How Your Rent Counts: The November 1 Rental-Income Rules Every Out-of-State Landlord Should Read
On September 2, 2026, Fannie Mae rewrote the part of its Selling Guide that decides whether rent on your out-of-state rental counts as income when you apply for a mortgage. The rewrite is Announcement SEL-2026-08, and the deadline is specific: lenders may apply the new rules now, but must apply them to every loan with an application date on or after November 1, 2026.
If you own rentals in another state and expect to buy again within the year, this matters more than any rate move: the arithmetic behind your debt-to-income ratio changed.
The one rule that reshapes everything: 12 months of property management experience
Fannie Mae’s new B3-3.8-01, General Rental Income Information states it plainly: “Lenders may only use positive rental income for qualifying income if the borrower(s) has at least 12 months of property management experience.” With less than 12 months — or none — the lender “may only use qualifying rental income to offset the PITIA.”
That distinction is the whole article. Two treatments of the same $1,800 rent:
- Offset only: the rent can cancel out the property’s own mortgage payment, taxes, insurance and dues (PITIA). Anything left over is discarded. It cannot help you qualify for the next house.
- Qualifying income: the positive leftover is added to your monthly income, which lifts how much house the same paycheck supports.
Proof of the 12 months comes from your most recent Form 1040 with Schedules 1 and E showing 365 Fair Rental Days; a business return (Form 1065 or 1120S) with Form 8825; a 12-month lease supplementing a Schedule E with fewer than 365 Fair Rental Days on a property owned a year or more; or two consecutive years of returns. Where none fit, a fully executed lease dated at least 12 months before application can work — but only if the property has not yet appeared on a tax return.
Interpretation, not fact: the practical effect is that Fair Rental Days on your Schedule E — a number most small owners never think about — becomes a qualifying document. A property rented nine months of the tax year, or taken offline for a renovation, can make you look inexperienced on paper after years of ownership.
The misconception to drop: “I have a signed lease, so the rent counts”
Under the new B3-3.8-01, a lease is now the exception rather than the default. A lender may only use a lease to establish qualifying rental income from an investment property in defined situations: an existing lease transferring to you at purchase, a property you bought during or after the last filed tax year, a property whose income was interrupted (a major renovation, for instance), a property placed in service in the current calendar year, or another situation the lender documents and justifies.
And leases are affirmatively not permitted in two cases that catch small investors constantly: a departing residence you are converting to a rental, and any investment property purchased within 45 days of the subject property. Both instead use market rents (an appraisal, a Form 1007, or at least three comparables from MLS, Zillow or Redfin) times 75%, minus PITIA — and both are offset-only.
Where a lease is allowed and the property is not on your last tax return, standards tightened. Newly executed leases (dated within two months of application) need a minimum term of six months with the first rent payment due on or before your new mortgage’s first payment date. The lease cannot be with a family member or interested party. And you must show the lease is real: two consecutive months of bank statements or electronic rent transfers, or the security deposit plus first full month’s rent with proof of deposit, or a third-party property management agreement with two months of rent receipts.
Short-term rentals get their own topic — and a 50% haircut
New topic B3-3.8-03 covers one-unit investment properties rented for brief periods, typically under 30 consecutive days. The property must be legally permitted to operate as a short-term rental, “including compliance with all applicable local registration and licensing requirements.” Gross rent is multiplied by 50%, not the usual 75%, with the remaining half accounting for vacancy and maintenance. And positive income is offset-only against that property’s PITIA. Documentation can come from a Form 1007 based on long-term rents, or validated data on three short-term comparables.
Converting your current home to a rental? Budget six months of reserves
The departing-residence framework adds a cash requirement that has nothing to do with the new house: if you have less than 12 months of property management experience, the lender must verify six months of reserves covering the vacated property’s PITIA — on top of any reserves required for multiple financed properties.
Not everything tightened. Freddie Mac’s Bulletin 2026-3 removed the minimum 720 Indicator Score for second homes and investment properties when a borrower is obligated on seven to 10 financed properties. Credit thresholds eased at the top of the portfolio range while income documentation got stricter.
A checklist for the next 60 days
- Pull your most recent Schedule E and read the Fair Rental Days line for every property. That single field drives the 12-month experience test.
- If a property shows fewer than 365 days, locate the leases or repair documentation that explain the gap before you apply.
- Document your own housing payment — rent, PITIA, or property taxes on an unmortgaged home. Without it, no rental income counts at all.
- If you plan to close two purchases close together, note the 45-day window: leases will not be usable on the earlier property, so market-rent documentation and offset-only treatment apply.
- Renewing a lease before applying? Keep the term at six months or longer, keep it arm’s-length, and keep bank records of deposits.
- Running a short-term rental? Confirm your local registration or license is current and in your name.
- Ask any lender you are talking to whether they have already implemented SEL-2026-08 or are waiting until November 1. The answer changes your file.
Related reading on Remote Real Estate: Is out-of-state real estate investing for you?, how to manage an out-of-state property yourself, how to hire a property management company, and what the federal ban on corporate homebuying changes for small landlords.
This article is educational information for property owners and is not financial, tax, legal, or lending advice. Mortgage eligibility rules are applied by individual lenders and can vary; confirm how any policy applies to your situation with a licensed mortgage professional and your own tax adviser. Sources: Fannie Mae Announcement SEL-2026-08 (September 2, 2026) and Selling Guide topics B3-3.8-01 through B3-3.8-06 (09/02/2026), and Freddie Mac Bulletin 2026-3 (March 4, 2026).
