Buying a home or expanding your real estate portfolio? One of the key factors in getting approved for a mortgage is your debt-to-income ratio (DTI).
While your job income plays a major role, many borrowers overlook another potential qualifying factor: rental income.
Whether you already own a rental property or are considering one, understanding how to prove rental income for a loan can expand your buying power and increase your chances of mortgage approval.
In this guide, we’ll walk through the most common rental income scenarios and how lenders evaluate them, including what counts, what documentation you need, and how to make rental income work for your mortgage application.
Speak with a GO Mortgage loan advisor.Can I use rental income to qualify if the home I’m buying is an investment property?
Yes, you can. If you’re buying a home with the intent to rent it out, lenders typically allow a portion of the anticipated rental income to count toward your qualifying income.
Here’s how it works:
- During the mortgage process, your lender will order an appraisal that includes a market rent analysis.
- Generally, 75% of the appraiser’s market rent estimate can be counted toward your qualifying income.
Example: If market rent is appraised at $2,000/month, you can use $1,500/month as qualifying income. The 25% deduction accounts for vacancy periods and maintenance expenses.
Keep in mind, you’ll need to document that the property is not just rentable, but likely to generate income consistently. This often includes rental history if previously leased or confirmation of current tenant agreements.
In 2025, some lenders may also ask for evidence of property management arrangements or prior landlord experience to validate rental projections, especially for first-time investors.
What if I’m buying a multi-unit property and living in one unit?
This is a popular path for house hackers or first-time investors.
If the property has 2 to 4 units and you plan to live in one, the mortgage is considered “owner-occupied.”
You can still use rental income from the other units:
- Again, an appraisal will determine the market rent per unit.
- You can use 75% of the rental income from the non-owner-occupied units to qualify.
This setup offers the dual benefit of lower interest rates (compared to pure investment loans) and rental income offsetting part of your mortgage payment.
Can I use income from an ADU (Accessory Dwelling Unit) to qualify?
This one’s tricky. Even though ADUs (like basement apartments or garage studios) are often rented out, their rental income usually can’t be counted toward qualifying for a mortgage under conventional financing guidelines.
Why? Lenders don’t consider rental income from an ADU as stable or predictable enough to include in your DTI calculation. It’s considered non-conforming income.
Tip: Always check local zoning laws and talk to your lender about whether the ADU can be used as income in other loan programs. FHA and VA guidelines, for example, may differ.
What if I’m converting my current home into a rental and buying a new primary residence?
Good news—this is allowed!
If you’re buying a new home to live in and turning your current home into a rental:
- Provide a signed lease agreement.
- Show proof of a security deposit or first month’s rent received.
Your lender may allow 75% of the lease income to count toward your qualifying income.
This can significantly improve your DTI if you’re still carrying the mortgage on the prior property. It’s also a smart way to retain and build equity while moving into a new home.
I already own a rental property. How do I prove rental income for a loan?
If you already own an investment property, your lender will rely on your federal tax returns—specifically Schedule E of your IRS Form 1040.
Rental income on your tax returns reflects:
- Gross rent received
- Operating expenses (maintenance, property taxes, insurance)
- Net rental income (what actually counts for qualifying)
Important: The amount used to qualify is not based on your lease but your reported income. Lenders typically average the income over the past two years if there are fluctuations.
If the property was acquired mid-year, expect to provide supplemental documents (leases, rent checks, management statements) to support your income claims.
What if my rental property was just purchased or hasn’t shown up on my tax return yet?
If you acquired the property recently or it was vacant for a period, there may be flexibility:
- Provide your settlement statement showing the purchase date.
- Include a current lease agreement and proof of collected rent.
- Explain any periods of vacancy or renovation with documentation.
You may also be asked to show a property management agreement, especially if you’re not self-managing the rental.
The goal is to demonstrate a reasonable expectation of consistent rental income.
How to prove rental income for a loan
To use rental income as qualifying income, be prepared to provide:
- Signed lease agreements
- Proof of rent payments (bank statements, checks, etc.)
- Recent tax returns (including Schedule E)
- Appraisal reports with market rent analysis
- Documentation of occupancy or vacancy periods
- Ownership documentation (settlement statement, title)
Lenders are verifying both the stability of your income and your capacity to manage the added debt.
If the property is jointly owned, income and expenses may be prorated.
Does the rental income need to come from long-term leases?
Typically, yes. Lenders prefer documented, long-term lease agreements (with a minimum term of 6–12 months) when considering rental income for qualification purposes.
Short-term rentals (Airbnb, VRBO) are often excluded unless:
- They’ve been in operation for 12+ months
- You can show consistent, reported income via tax returns
- You provide a rental history or property management records
Speak with your lender if you plan to use short-term rental income—it may be accepted with strong documentation, but policies vary widely.
Bottom line: Rental income can boost your buying power
Using rental income to qualify for a mortgage can be a powerful strategy, especially if you’re a real estate investor, house hacker, or upgrading your living situation.
Just remember:
- Only a portion of the income typically counts
- Documentation is key
- Lenders follow strict guidelines to verify and validate income
Ready to explore your mortgage options?
Let GO Mortgage help you understand how rental income can improve your chances of approval.Get started with GO Mortgage today or speak with a mortgage advisor who understands investment and multi-unit financing.