When current lease agreements or market rents reported on Form 1007 or Form 1025 are used, the lender must calculate the rental income by multiplying the gross monthly rent(s) by 75%. (This is referred to as “Monthly Market Rent” on the Form 1007.) The remaining 25% of the gross rent will be absorbed by vacancy losses and ongoing maintenance expenses.
When using a lease agreement, the lease agreement amount must be supported by
- Form 1007 or Form 1025, as applicable, or
- evidence the terms of the lease have gone into effect. Evidence may include:
- two months consecutive bank statements or electronic transfers of rental payments for existing lease agreements, or
- copies of the security deposit and first month’s rent check with proof of deposit for newly executed agreements.