Border Income Mortgage Guidelines

Boarder Income Mortgage Guidelines To Add As Additional Income

Gustan Cho Associates are mortgage brokers licensed in 48 states

This Article Is About Boarder Income Mortgage Guidelines To Add As Additional Income

With home values on the rise across the United States, many borrowers are trying to squeeze out every penny of income that can be applied to their overall debt to income ratio. Lately, we have been receiving more and more calls from a client asking if they can use border income. Boarder income is described as renting space inside the borrower’s dwelling. In short, charging someone rent to live in your home. The question is, can that rent money be counted as income?  In this blog, we will examine how conventional, FHA, and VA loans view boarder income. We will also discuss Boarder Income Mortgage Guidelines To Add As Additional Income.

HUD Boarder Income Mortgage Guidelines

FHA loans and boarder income:

HUD is the parent of FHA.

  • Per HUD guidelines, boarder income may be used to qualify for an FHA mortgage
  • Of course, there are certain requirements necessary before this income can be counted
  • In order to count boarder income, the borrower must document a two-year history of receiving income from boarders that are shown on their tax returns
  • AND the borrower must document that they are currently receiving boarder income

If you are not currently receiving boarder income, then you may not count those rents received over the past 2 years as income.

Documentation Required By HUD To Count Boarder Income As Qualified Income

What documentation is required per HUD:

  • The lender must obtain past two years tax returns showing boarder income
  • The lender must obtain a current lease reflecting the terms for the renter

Note: To use boarder income for the purchase of a new home, the lender must obtain an executed written lease agreement documenting the intent to continue receiving boarder income in the new home.

Boarder Income Mortgage Guidelines For Debt To Income Ratios

How much boarder income will count against the debt to income ratio? Per HUD guidelines, the amount of boarder income counted towards the overall debt to income ratio is the lesser of the two-year average from tax returns. OR the amount on the current lease agreement. It is important to understand they will always use the lesser of the two values

Fannie Mae And Freddie Mac Boarder Income Mortgage Guidelines

Conventional loans in boarder income:

For the most part boarder income in a borrower’s principal residence or second home is NOT considered stable income. Meaning it is not allowed to count for your overall debt to income ratio except if the following occur:

If a borrower with disabilities receives rental income from a live-in personal assistant:

  • The rental payments may be considered as acceptable stable income in the amount up to 30% of the total gross income that is used for qualification
  • Personal assistants are usually paid by Medicaid Waiver funds
  • This includes room and board
  • In this case, rental payments are made directly to the borrower

With this situation, the individual may be related to the borrower.

HomeReady Boarder Income Guidelines

HomeReady Boarder Income Guidelines

Per Fannie Mae, you may use boarder income with the HomeReady program. Boarder income IS allowed for one-unit properties. Income can be used up to 30% of total income used for qualification.

In order to use boarder income with HomeReady there are a few items the lender must document:

  • The lender must document the renter has lived with the borrower and paid rent to the borrower for the past 12 months
  • The Boarder must provide documentation to demonstrate a history of shared residency
  • The lender must document a copy of a driver’s license, bill, or bank statement that shows the boarder’s address is the same as the borrower’s address
  • This will document that the Boarder truly lives with the borrower
  • The lender must document the Boarder has paid rental payments to the borrower for at least the past 12 months
  • OR at least 9 of the most recent 12 months provided the rental income is average over a 12-month period
  • If you are going the route of most recent 9 of the past 12 months, they will average the 9 rent payments over a 12-month period for income calculation

The payment of rent by the boarder must be paid directly to the borrower, if paying to a third party, the boarder income will not be allowed.

VA Boarder Incom Guidelines

VA loans and boarder income:

As of December 12th, 2018, per HUD guidelines, a VA loan will NOT consider boarder income. Meaning any rents received from a roommate will not count towards your debt to income ratio. Even if you file boarder income on your tax returns and have a current lease agreement, the rents received will not be counted. The VA hinted at their lender conference in April 2018 that they are considering a change and allowing a percentage of boarder income to count in your debt to income ratio. Gustan Cho Associates are up-to-date on all of their mortgage guidelines. As soon as an announcement is made from HUD, we will update our readers.

While we understand boarder income is not the most common situation, we are seeing more and more questions around this topic. Hopefully, the VA boarder income guideline is updated soon. If you have questions regarding your specific scenario, please contact us directly. We are available 7 days a week. please contact Mike Gracz on (800) 900-8569 or text us for a faster response. Or send an email to

Similar Posts

Leave a Reply

Your email address will not be published. Required fields are marked *