FHA issued Mortgagee Letter 2025-4, revising requirements for documenting and calculating income received from individuals renting space inside borrower homes (boarder income). Per the Mortgagee Letter (ML), FHA:
- Expanded the types of acceptable income verification documentation to include bank statements, canceled checks, and/or deposit slips showing rental payments received;
- Clarified that boarder income is permitted whether the borrower is currently a renter or the homeowner;
- Reduced the acceptable rental income history from 2 years to 12 months;
- Added flexibility to allow a borrower with a 12-month rental history to qualify for an FHA-insured mortgage using boarder income as long as the income has been received for at least 9 of the most recent 12 months, is currently being received, and is averaged over a 12-month period; and
- Added a prohibition that boarder income cannot exceed 30% of the borrower’s total monthly effective income.
The revisions must be implemented for FHA case numbers assigned on or after March 14, 2025 (lenders may, however, implement the revisions immediately).
Click to view the FHA Mortgagee Letter 2025-04: https://www.tenaco.com/wp-content/uploads/2025/01/FHA-Mortgagee-Letter-2025-04-01-13-25.pdf
Click to view the FHA Info #2025-05: https://www.tenaco.com/wp-content/uploads/2025/01/FHA-Info-2025-05-01-13-25.pdf
