Texas Premier Mortgage

Conventional Rental Income Cheat Sheet – New Rental Income Guide (DSCR Investor loans qualify off of the 1007 rental income only)

Use this guide when applying for a loan with rental income.

✅ ACCEPTABLE SOURCES

  • Tax Returns (Schedule E) – Preferred for properties with rental history
  • Lease Agreements – For newly rented properties or purchases
  • Appraiser’s Market Rent (Form 1007/1025) – If no rental history

DOCUMENTS REQUIRED

Scenario Required Docs
Rented Last Year (Schedule E) Tax returns (1040 & Schedule E), depreciation add-back, mortgage docs
New Rental / Converted Unit Lease + 1007 or 1025 + proof of no prior rental use
Multi-Unit Primary Residence Lease or 1025 + owner occupancy proof
ADU Income (limited use) Lease or 1007 + zoning compliance


INCOME CALCULATION

  • From Schedule E
    Net Income = Gross Rent – Expenses + Depreciation + Interest + Taxes + Insurance + HOA
  • From Lease or Appraisal
    Qualifying Income = Gross Rent × 75% (25% vacancy adjustment)

texas refinance

USE IN QUALIFYING

  • Positive Net Income = Added to qualifying income
  • Net Loss = Added to liabilities
  • New Rentals = Must use lease or appraiser data × 75%

RESERVES

  • Required for investment properties
  • 2–6 months depending on property count and risk
  • Must be liquid or retirement assets

INELIGIBLE RENTAL INCOME

  • Short-term rentals (Airbnb/VRBO) without full tax history
  • Illegal/unzoned units
  • Cash/undocumented rent
  • Boarders (unless reported on taxes for 12+ months)

TIPS FOR SUCCESS

  • Use Schedule E when available
  • Lease must be current & valid for 12+ months
  • Have reserves and strong credit
  • Keep property count manageable
  • Always document ownership, leases, and rental history

For more information about buying an investment purchase and the benefits and loan options and how it may apply to you, please contact us direct at 281-627-4222 or submit the “Quick Quote” form on this page.

 

Posted in blog