"Can I Rent Out the Home I'm Leaving and Count the Rent on My Next Mortgage? Why FHA Wants a Lease and Fannie Mae Will Not Accept One"

The moving truck is booked for the last Saturday of the month, and the family two doors down has already asked whether your home will be for rent. You have a tenant lined up before you have a forwarding address, and the rent they offered covers your current payment. The lender on your new home will want to see that math too, and the paperwork that proves the rent depends on which loan program you choose.

Yes. The rent from the home you are leaving can help you qualify for the next one on either an FHA or a conventional loan. FHA wants a signed lease of at least one year plus proof the tenant paid the deposit or first month's rent. Fannie Mae will not take a lease and uses market rent from an appraisal or comparable rentals instead.

I'm Jeff Moran, a mortgage broker in Bluffton, South Carolina, originating since 1996, licensed in fifteen states, NMLS #483943, through C2 Financial Corporation. A client who is relocating usually owns a home, and if a tenant is moving into it, that rent can count toward qualifying for the next one.

How does FHA count rent from the home I'm moving out of?

FHA's rule lives in HUD Handbook 4000.1, Section II.A.4.c, Income Requirements (TOTAL), revised 04/10/2025, in the part on rental income from other real estate. The handbook calls your current home a property being vacated, and it asks for five things before the rent counts.

You are moving more than 100 miles away. The handbook says you must be relocating to an area more than 100 miles from your current principal residence. A move across the county does not meet it, and in that case the full payment on the old home stays in your debt ratio, which is your monthly debts measured against your monthly income.

A signed lease of at least one year that runs past your closing. The lender has to get a lease of at least one year's duration after the new mortgage closes, so a month-to-month arrangement does not meet the rule.

Proof the tenant has paid. The lender needs evidence that the security deposit or the first month's rent was paid, and that usually means the deposit showing on your bank statement.

An appraisal that shows market rent. Because you have no history of rental income on this home since your last tax filing, the lender needs an appraisal that shows market rent. For a one-unit home that is a Form 1004 appraisal with a Single Family Comparable Rent Schedule (Form 1007). The appraiser does not have to be on HUD's roster of FHA-approved appraisers.

At least 25 percent equity in the home you are leaving. The same appraisal has to show that you have at least 25 percent equity in the property, and for a client who bought recently with a small down payment this is often the condition that decides it.

The lender then takes the lesser of the appraiser's fair market rent or the rent on your lease, counts 75 percent of it, and subtracts the full PITI on the old home. PITI is principal, interest, property taxes and homeowners insurance. A positive result is added to your qualifying income. A negative result is counted as a monthly debt.

How does Fannie Mae count rent from a departing residence?

Fannie Mae's rule is Selling Guide B3-3.8-05, Rental Income from Non-Subject Property: Departing Residence, revised 09/02/2026. It covers a primary residence you will vacate and convert to an investment property when you buy the new one. Selling Guide B3-6-06, Qualifying Impact of Other Real Estate Owned, also revised 09/02/2026, sends a converting home to that rule. Does the payment on a property I already own count against my next mortgage walks through the rest of B3-6-06, so I will stay on the rental piece here.

Three things set Fannie Mae apart from FHA.

Fannie Mae will not use the lease. The section says it in one sentence: "Lease agreements are not permitted for any departing residence." The lender documents market rent instead. That can be a complete appraisal that includes market rents, a Single-Family Comparable Rent Schedule (Form 1007) for the unit you occupied, or market analysis tools such as Zillow, Redfin or the MLS. If the lender uses those tools, it must gather at least three comparable rentals, from the same market area when possible, and it has to document your current housing payment before any of the rent can be used.

There is no distance rule. Fannie Mae's section says nothing about how far you are moving. A client renting out a home across town and buying a larger one can use this rule, where FHA's 100-mile test would stop them.

The rent can only offset the old payment. The lender multiplies the gross market rent by 75 percent and subtracts the PITIA on the departing home, which is the PITI plus any association dues. A positive result may be used to offset the departing residence PITIA only, so the old payment leaves your debt ratio and nothing extra is added to your income. A negative result is included in your debt-to-income ratio.

Fannie Mae adds one condition that FHA's rule does not carry. If you have less than twelve months of property management experience, the lender must verify six months of reserves to cover the PITIA on the home you are vacating. That is on top of any reserves required for owning more than one financed property. What counts as mortgage reserves covers which accounts qualify.

One tenant, two sets of paperwork

	FHA, Handbook 4000.1 II.A.4.c	Fannie Mae, Selling Guide B3-3.8-05
Lease	Required, at least one year after closing	Not permitted for any departing residence
Proof the tenant paid	Security deposit or first month's rent	Not part of the rule
How market rent is shown	Appraisal with a Form 1007 rent schedule	Appraisal with market rents, a Form 1007, or three comparable rentals
Distance of the move	More than 100 miles from the current home	No distance rule
Equity in the old home	At least 25 percent, shown by the appraisal	No equity test in this section
Share of rent counted	75 percent of the lesser of market rent or lease rent	75 percent of market rent
Positive result	Added to your qualifying income	Offsets the old payment only
Negative result	Counted as a monthly debt	Counted in your debt ratio
Reserves tied to the rental	None in this section	Six months of the old PITIA if under twelve months as a landlord

Freddie Mac falls between the two

A conventional loan can also run under Freddie Mac's guide, and the lender decides which of the two guides applies to your file. Freddie Mac's rule for turning a primary residence into a rental is in Single-Family Seller/Servicer Guide Section 5306.1, Rental income, revised 04/12/2026, and Freddie Mac does accept the lease. The lease has to be current and fully signed, and the first rent payment has to come due no later than the first payment on your new mortgage. The lease also needs something behind it: either a Form 72 or Form 1000 rent schedule from an appraiser, or proof that you have received two months of rent, or the deposit plus the first month. If you have not managed a rental for at least a year, the net rent can only offset the payment on the home you converted.

The program your move points toward

You are moving far, you have the equity, and your savings are thin after the move. FHA may be the program that counts the rent for you, and it is the only one that adds a positive result to your income. Why FHA quoted better than conventional on the same file explains why the lower rate is not always the cheaper loan.

The rent on your old home is below its payment. Both programs count the shortfall against you, and the question becomes whether your ratio holds with it. How the debt-to-income ratio works is the frame for that arithmetic.

You are not sure yet whether you are renting or selling. Should I buy the new home before I sell mine covers the sale side. What changes when you relocate to another state covers the closing and licensing side of a long move.

The mistakes I see on these files

Handing a Fannie Mae underwriter the lease. The section says leases are not permitted for a departing residence, so the lease does not move the number. The underwriter works from the rent schedule or the comparable rentals.

Spending the security deposit. FHA wants evidence that the deposit or the first month's rent was paid, and the cleanest proof is the money in your account on the statement we send in. Leaving it there until closing keeps that proof simple.

An example with numbers

The numbers below are made up to show the mechanism, and they are not a quote.

Say you earn $10,000 a month before taxes, your car and credit cards add up to $500, and the new home's full payment is $2,900. The home you are leaving carries a PITI of $1,800. Your tenant signed a one-year lease at $2,600 and paid the deposit, and the appraiser's rent schedule puts market rent at $2,700.

On an FHA loan, the lender uses the lesser of the two rents, which is the $2,600 on the lease.

Lease rent (the lesser figure)	$2,600
75 percent of that	$1,950
Less the old home's PITI	$1,800
Net rental income	$150

That $150 is added to your income, so you qualify on $10,150 a month. Your debts are the new payment plus the car and cards, $3,400, for a ratio of 33.5 percent.

On a Fannie Mae conventional loan, the lease is set aside and the lender uses the $2,700 market rent from the Form 1007.

Market rent from the rent schedule	$2,700
75 percent of that	$2,025
Less the old home's PITIA	$1,800
Adjusted net rental income	$225

That $225 offsets the old payment, so the $1,800 leaves your ratio entirely, and the extra $225 is not added to your income. Your debts stay at $3,400, and your ratio is 34.0 percent. If this is your first rental, the lender also verifies $10,800 in reserves, six months of the $1,800.

Now say your new home is 40 miles from the old one. On a conventional loan nothing changes, because Fannie Mae has no distance rule. On an FHA loan the rent is not counted at all, the full $1,800 stays in your debts, and your ratio is 52.0 percent.

The documents to gather before we talk

When you're ready, please provide the most recent mortgage statement on the home you are leaving, all pages, please, along with the current property tax bill and the homeowners insurance declaration page. That gives us the full payment both programs subtract from the rent.

If you already have a tenant, please provide the complete signed lease, all pages and any addenda, and the bank statement showing the deposit or first month's rent arriving in your account. Please provide all pages, even if the last page is intentionally left blank. I will order the rent schedule once we know which program the file is running under.

Price your scenario with the old home as a rental

If you are planning to keep your home and rent it when you move, you can price your own scenario with the old payment and the expected rent both in it. You choose the option that works best for you.

Nothing here is a loan approval, a denial, or a commitment to lend. HUD and Fannie Mae revise these sections, so the linked text is the one to rely on.

Common questions

Can I rent out my current home and use the rent to qualify for an FHA loan on the next one?

Yes, under HUD Handbook 4000.1 Section II.A.4.c, if you are relocating more than 100 miles from your current principal residence. The lender needs a signed lease of at least one year after the new mortgage closes, evidence that the deposit or first month's rent was paid, and an appraisal showing market rent and at least 25 percent equity. It counts 75 percent of the lesser of market rent or lease rent and subtracts the old home's PITI.

Does Fannie Mae accept a lease on a departing residence?

No. Fannie Mae Selling Guide B3-3.8-05, revised 09/02/2026, states that lease agreements are not permitted for any departing residence. The lender documents market rent instead, with an appraisal that includes market rents, a Form 1007 rent schedule, or market analysis tools with at least three comparable rentals. It counts 75 percent of that market rent, subtracts the PITIA on the departing home, and uses a positive result to offset that PITIA only.

Do I have to move 100 miles away to count rent on the home I'm leaving?

On an FHA loan, yes. HUD Handbook 4000.1 requires that you relocate to an area more than 100 miles from your current principal residence before rental income from a home you are vacating can be used. On a conventional loan under Fannie Mae's B3-3.8-05 there is no distance requirement, so a move across town can still count the market rent.

How much of the rent counts on the home I'm leaving?

Both FHA and Fannie Mae count 75 percent of the rent and then subtract the full monthly payment on the old home. FHA uses the lesser of the appraiser's market rent or the lease rent, and adds a positive result to your income. Fannie Mae uses market rent only, and a positive result offsets the old payment only. On both, a negative result counts against you as a monthly debt.

Do I need reserves to keep my old home as a rental when I buy the next one?

On a Fannie Mae conventional loan, yes if you are new to it. Selling Guide B3-3.8-05 requires six months of reserves covering the PITIA on the vacated home when you have less than twelve months of property management experience. FHA's departing-residence rule in Handbook 4000.1 Section II.A.4.c does not include a reserve requirement tied to the rental.

Estimates and educational information are not a loan approval or commitment to lend.