Fannie Mae: Conversion of Principal Residence Requirements No Longer Apply (Demo)

Effective August 15, 2015, Fannie Mae will revert back to pre-2008 requirements for homeowners who wish to keep their primary residence and convert the home to a rental property while qualifying for another principle residence.

This is BIG news for Seattle real estate agents and Washington State home owners…..

Here’s why:

During the height of the housing crisis, Fannie Mae imposed more strict guidelines for homeowners that wished to keep their home while trying to qualify to purchase another. These guidelines were put in place to prevent “buy and bail” situations where the homeowner would “say” they are renting out their home and use a lease agreement to qualify for another home, then to short sale or walk away from that home once their new home was purchased.

Another reason why this guideline was put into place was to ensure borrowers had adequate reserves in their bank to manage multiple homes.

Below you will find a breakdown on the old guidelines vs the new guidelines and how they may benefit you:

Post 2008 Fannie Mae Income/Reserve Requirements
– Current principle residence AND proposed new mortgage payments must be used to qualify for a home loan.
– 75% of the gross rental income can be used **IF** an appraisal verifies 30% equity in the home AND a fully executed lease agreement with proof of rental deposit can be verified.
– Minimum Reserve Requirements: 6-month’s payment of principle/interest/taxes/insurance.

New Fannie Mae Income/Reserve Requirements
– Rental income is considered based on a fully executed lease agreement provided by the borrower (now landlord).
– If the lender uses the lease agreement, net rental income for qualifying will be 75% of the gross rent collected.
– Minimum reserves requirements for the rental home – 2 month’s payment of principle/interest/taxes/insurance.

Link For the Fannie Mae Selling Guide – SEL-2015-07

For more information on getting approved for a mortgage, I encourage you to visit my Mortgage Concierge Page.

If you are a real estate agent or potential home buyer in the Pacific Northwest, I’d love to connect with you to make sure that you get the best information available to you.  Feel free to text/call me for more information.  I am here to help!

I love helping my readers!  I can be reached at (425) 350-7136 or

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