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How to Rent Out Your House and Still Qualify for the Next One
If you plan to rent out your house when you buy your next home, Fannie Mae’s updated rental income rules can change how much you qualify for and how much savings you need to keep available.
Your lender now needs a supported market rent figure for the home you’re leaving, and Fannie Mae no longer accepts a signed lease as proof of that rent.
Only 75% of that market rent counts in the qualifying calculation, and borrowers without rental history on their tax returns face a separate reserve requirement.
Both rules can make a home that looks affordable month to month require more cash than you planned to keep on hand.
Before you rent out your house, review how your lender documents the rent, how it offsets your current payment, and how much money you need to keep in reserve.
🏡 What Is a Departing Residence?
A departing residence is the home you live in now and plan to leave when you buy your next one.
If you keep that home and rent out your house to a tenant, your lender must account for the payment you still owe.
Many homeowners expect the tenant’s rent to cover that payment.
Fannie Mae’s rules set how the lender documents that rent and how much of it can offset the payment on the home you’re leaving.
You can still keep your current home, and these rules give you the numbers to plan around before you commit to the next purchase.
Why a Signed Lease No Longer Counts
For years, the standard approach was to find a tenant, sign a lease, and hand that agreement to your loan officer as proof the rent was real.
Fannie Mae closed that door, and its Selling Guide now says lease agreements aren’t permitted for any departing residence.
The rule has no exceptions for a strong tenant or a long-term lease.
If you want to rent out your house while you qualify for the next one, your lender needs a market rent figure based on comparable rentals.
📄 Three Ways to Document Market Rent
Your lender can support the market rent figure with one of these:
- A full appraisal report. The report includes market rents for the home you’re leaving.
- A single-family comparable rent schedule. The schedule covers the unit you currently occupy.
- A market analysis. The analysis includes at least three comparable rentals from Zillow, Redfin, or the multiple listing service, commonly called the MLS.
Your lender also needs documentation of your current house payment before using the rental number.
If you plan to rent out your house, ask your loan officer which documentation method fits your situation before you sign anything with a tenant.
Only 75% of the Rent Counts
Once your lender has a supported market rent figure, Fannie Mae counts only 75% of the gross rent.
Your lender compares that 75% against the payment on the home you’re leaving, and the result never goes straight onto your income.
For example, a supported market rent of $2,000 a month produces a qualifying rental amount of $1,500.
$2,000 × 75% = $1,500
A home whose full rent seems to cover its payment can still fall short once your lender applies the 75% calculation, so this is the first number to check when you rent out your house.
💸 What Goes Into Your PITIA
Your lender measures the rent against your PITIA, which is the full monthly housing payment on the home you’re leaving.
PITIA includes:
- Principal and interest on the mortgage
- Property taxes
- Homeowners insurance
- Homeowners association or other association dues
Calculating only principal and interest makes the plan to rent out your house look more helpful than it is, so include the full payment.
How the Rent Offsets Your Old Payment
When you rent out your house, 75% of the market rent can cancel out the payment on the home you’re leaving.
When that 75% falls short of your PITIA, your lender adds the difference to your monthly debt on the new loan.
Two examples with the same $2,000 market rent show how the result can change.
1. When the Rent Covers the Payment
- Supported market rent comes back at $2,000 a month.
- 75% of that rent equals $1,500 a month.
- Your existing PITIA is $1,300 a month.
- The adjusted rent lands $200 above the payment.
In this case, the rent offsets the old payment, and the house you’re leaving no longer counts against you.
The extra $200 stays out of your qualifying income, so it never raises how much house you can afford.
2. When the Rent Falls Short
- Supported market rent comes back at $2,000 a month.
- 75% of that rent equals $1,500 a month.
- Your existing PITIA is $1,700 a month.
- The adjusted rent lands $200 below the payment.
Your lender adds that $200 shortfall to your debt obligations on the new loan.
The full $2,000 rent covers the $1,700 payment, leaving a $300 surplus, but the 75% calculation still results in a $200 shortfall.
Before you rent out your house, multiply your market rent by 75% and compare it against your full PITIA so you know whether the rent helps your approval or works against it.
That rental income only cancels out the old payment when the math lands in your favor. It doesn’t add to how much house you can afford.” — Wade Betz, Winning With Wade | Mortgage Education and Strategy
📋 The Reserve Requirement for New Landlords
If you plan to rent out your house and have had rental activity on your tax returns for less than 12 months, Fannie Mae requires six months of PITIA reserves on the departing residence.
This reserve requirement stays separate from any reserves you need for other financed properties, as well as your down payment and closing costs.
The money has to sit untouched in a verifiable account, so the same dollars can’t count as reserves and also go toward the purchase.
Many first-time landlords focus on finding a tenant and saving for the down payment, and the reserve requirement catches them off guard.
It applies because you don’t have a landlord track record so that a strong rental calculation won’t remove it.
What Six Months of Reserves Looks Like
Using the $1,700 PITIA from the earlier example, the reserve works out to $10,200.
$1,700 × 6 = $10,200
That $10,200 needs to sit in a verifiable account on top of the funds for your new purchase and any other reserves your new mortgage requires.
When you rent out your house without a rental history, this number deserves its own line in your budget.
🔍 Plan Your Savings Before You Rent Out Your House
Your savings may look like enough until you allocate each requirement its own share. Review these categories separately:
- Your down payment goes toward the new home purchase.
- Your closing costs cover the new mortgage transaction.
- Your reserves on the home you’re leaving equal six months of PITIA when the rental-history rule applies.
- Any other required reserves depend on your financing situation or other financed properties.
Start by multiplying the PITIA on the home you’re leaving by six and setting that amount aside.
Then check whether what’s left covers your down payment, closing costs, and any other required reserves.
Reserve money stays in your account, so it can’t help pay for the purchase.
Finding a gap in your savings before you rent out your house or start shopping gives you time to adjust your plan.
When the Numbers Don’t Work
If the math on your current home doesn’t support your next purchase, identify that before you commit to a contract.
A debt service coverage ratio (DSCR) loan offers another path for real estate investors because it qualifies a rental property based on what it earns.
A DSCR loan is a separate financing approach, so it deserves its own review if your original plan to rent out your house falls short.
Under these rules, keeping your current home as a rental remains an option, and reviewing supported market rent, the payment offset, rental history, and reserves together gives you a realistic purchase budget.
✅ Rent Out Your House Checklist
Work through these steps before you list your current home or start shopping for the next one.
- Document your current payment, including principal, interest, taxes, insurance, and association dues.
- Ask your loan officer which method will document market rent on the home you’re leaving.
- Multiply the supported gross rent by 75%.
- Compare that result with your existing PITIA to see whether the rent offsets the payment or leaves a shortfall.
- Check whether you have less than 12 months of rental activity on your tax returns.
- Multiply the PITIA on the home you’re leaving by six if the reserve requirement applies.
- Confirm your savings cover your purchase funds and required reserves separately before you rent out your house.
Frequently Asked Questions (FAQs)
Can I rent out my current house and still buy another home?
Yes, you can rent out your house and buy your next home under Fannie Mae’s rules. Your lender reviews the supported market rent, your existing payment, your rental history, and your required reserves to see how the home you’re leaving affects your approval.
Can I use a signed lease to document the rent?
Fannie Mae’s Selling Guide doesn’t permit lease agreements for a departing residence, even with a strong tenant or a long-term lease. Your lender needs market rent supported by an appraisal, a comparable rent schedule, or a market analysis.
How much of the rent counts when I rent out my house?
Fannie Mae counts 75% of the gross market rent when you rent out your house. Your lender compares that amount against the full PITIA on the home you’re leaving.
What happens if 75% of the rent is less than my old payment?
Your lender adds the difference to your debt on the new loan. For example, $1,500 in adjusted rent against a $1,700 payment creates a $200 monthly shortfall.
Does extra rent help me afford a bigger home?
Rental income from the home you’re leaving can offset the old payment when the math works in your favor. Any amount above that payment doesn’t count toward your qualifying income.
Can reserve funds also cover my down payment?
Reserve funds must stay in a verifiable account and can’t count toward your down payment or closing costs. If you rent out your house with less than 12 months of rental history, plan on six months of PITIA in reserves on top of your purchase funds.
How much is six months of reserves on a $1,700 PITIA?
Six months of reserves on a $1,700 PITIA equals $10,200. That amount stays separate from your purchase funds and any other required reserves.
About the Author
Wade Betz
Mortgage Broker at Winning WIth Wade · NMLS #280613
Wade has been a stalwart in the mortgage industry since 2006, dedicating himself to helping thousands of families navigate the complexities of home financing. With so much experience, he stands out as a leading mortgage originator in the Dallas-Fort Worth area.
Specializes in: DSCR Loans, VA Loans, Reverse Mortgages
Licensed in: AL, AZ, AR, CA, CO, CT, FL, GA, ID, IL, IN, KS, LA, MD, MI, MS, MT, NE, NJ, NM, NC, OH, OK, OR, PA, SC, TN, TX, VA, WA, WI
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