Blank Fannie Mae 1037 Template

1. Neglecting to provide accurate rental documentation: Many applicants fail to attach the required documents, such as Schedule E or the lease agreement, which can lead to approval delays.

2. Miscalculating service months: When determining how long the property has been in service, some forget to divide Fair Rental Days by 30 or mistakenly assume they qualify for 12 months without supporting evidence.

3. Overlooking expenses on Schedule E: It's crucial to correctly list total rents received and to subtract relevant expenses. Failure to do this can inflate the adjusted rental income.

4. Ignoring the vacancy and maintenance adjustment: When using the lease agreement method, some overlook the 25% deduction for vacancy loss and management expenses, leading to an inaccurate rental income calculation.

5. Confusing primary housing expenses: Applicants often misidentify PITIA as primary housing expenses. It's essential to include the right figures to avoid misrepresenting the debt-to-income ratio.

6. Not reconciling qualifying income: Applicants sometimes fail to combine the monthly qualifying rental income with their primary income accurately. This step is vital for assessing financial eligibility.

The Fannie Mae 1037 form is used to document rental income for individuals who own properties and are looking to qualify for a mortgage. Along with this form, there are several other documents that play a crucial role in providing the necessary financial information and ensuring compliance with lending requirements. Each of these documents serves a unique purpose in the overall rental income verification process.

• Schedule E (IRS Form 1040): This tax form is utilized to report income and losses from rental real estate. It helps track the income received from rental properties as well as any associated expenses, providing a comprehensive overview of profitability.
• Lease Agreement: A lease agreement is a legal document between a landlord and tenant that outlines the terms and conditions of renting a property. This document is critical in confirming the rental amount agreed upon and the duration of the tenancy.
• Fannie Mae Form 1025: This form is specifically designed for appraising 2- to 4-unit properties. It provides a method to assess the market rent for the property, which helps determine potential rental income and verify that it aligns with the loan application.
• Income Documentation: Additional income documentation may be required, such as pay stubs or tax returns, to corroborate the borrower's financial assessment. This ensures that all income sources are included in the evaluation of the borrower's capacity to repay the loan.

Collectively, these documents support the validation of rental income claimed on the Fannie Mae 1037 form. They help lenders make informed decisions, ensuring that borrowers are adequately assessed based on their financial capabilities and the income potential of their rental properties.

The Fannie Mae 1037 form has similarities to the IRS Schedule E form, which is used for reporting rental income and expenses from real estate that is rented or leased. Similar to the Fannie Mae 1037, Schedule E allows the taxpayer to list all sources of rental income and deduct associated expenses. Both documents require the identification of rental units and the calculation of net rental income after expenses, providing a method of establishing qualifying rental income for potential financing purposes.

An additional document that parallels the Fannie Mae 1037 is the Lease Agreement. This legal document outlines the terms under which a rental property is leased to tenants. In terms of rental income documentation, both the Lease Agreement and the Fannie Mae 1037 require specified amounts of monthly rent that can be projected as qualifying income. While the 1037 may also consider market rent based on standardized forms, the Lease Agreement provides concrete terms directly related to the tenancy, ensuring clear expectations between landlord and tenant.

Fannie Mae Form 1025 shares a close relationship with the 1037 form. Form 1025 is specifically utilized for reporting the income potential of multiple-unit properties and includes a methodology for calculating market rents. The incorporation of Form 1025 in the qualitative assessment of rental income aligns with the strategy employed in the Fannie Mae 1037 for establishing accurate revenue estimates. This allows for comparable income evaluations for properties undergoing financing assessments.

The 1040 form can also be likened to the Fannie Mae 1037. This individual income tax return includes supplemental schedules such as Schedule E for reporting rental income. The 1040 form as a whole provides comprehensive financial information that can substantiate the overall income and ability to repay loans or mortgages. Both documents integrate aspects of rental income into a broader financial framework needed for qualifying for different types of financing arrangements.

Lastly, the HUD-1 Settlement Statement serves a similar purpose by detailing all charges and credits involved in the closing of a real estate transaction, including rental income considerations. While primarily focused on settlement-related expenses, this document also outlines the financial obligations of the borrower and can reflect how rental income factors into debt calculations. The HUD-1 and Fannie Mae 1037 both enhance understanding of financial viability in real estate transactions, ensuring that comprehensive assessments are considered for qualified lending purposes.

When filling out the Fannie Mae 1037 form for rental income, attention to detail is crucial. Here’s a helpful list of dos and don’ts to ensure you complete the form accurately.

• Do double-check the address of the principal residence to ensure it matches official documentation.
• Don't overlook the required documentation such as Schedule E, Lease Agreement, or Fannie Mae Form 1025.
• Do calculate the months the property was in service accurately, using Fair Rental Days where appropriate.
• Don't forget to specify expenses that can be added back, like insurance or HOA dues, on Schedule E.
• Do ensure your calculations of adjusted rental income are clear and divided by the correct number of service months.
• Don't confuse the rental income calculations for different units; keep them separate but cumulative.
• Do maintain records of any evidence needed for one-time extraordinary expenses claimed on the form.

Misconceptions about the Fannie Mae 1037 Form

1. The form only applies to single-family homes. The Fannie Mae 1037 form is used for 2- to 4-unit properties. It accommodates individuals who own multi-family properties, providing specific guidelines for calculating qualifying rental income.
2. Schedule E is the only method for documenting rental income. While Schedule E is a valid method, it is not the only option. Borrowers can also use a lease agreement or Fannie Mae Form 1025 to establish qualifying rental income, depending on the circumstances.
3. You must have reported Fair Rental Days to determine service duration. If Fair Rental Days are not reported, the property is automatically deemed to be in service for 12 months. This can simplify calculations for those without specific records.
4. The income calculated using the form is guaranteed to be accepted by lenders. Although the form outlines steps for calculating rental income, lenders may have their own criteria and may not accept all calculated income. Always verify with the lender for their specific requirements.
5. All rental income can be combined regardless of unit ownership. Only the income from non-owner-occupied rental units can be included in calculations. Rental income from the unit occupied by the borrower is not eligible.

Filling out the Fannie Mae 1037 form requires careful attention to detail. Here are key takeaways to consider:

• Gather documentation: You need Schedule E (IRS Form 1040) or a lease agreement/Fannie Mae Form 1025 for each rental unit.
• Calculate months of service: Determine the months the property has been rented by dividing Fair Rental Days by 30. If Fair Rental Days aren't reported, assume 12 months unless proven otherwise.
• Monthly qualifying rental income is calculated based on either Schedule E or the lease agreement/Form 1025, with specific steps to follow.
• Using Schedule E: Start with total rents received from non-owner-occupied units, then adjust for expenses, add back certain costs, and divide by the number of months in service.
• Lease Agreement/Form 1025 option: Use gross monthly rent or market rent, adjust for vacancy and maintenance with a 75% valuation, then combine income for different rental units.
• Ensure accuracy: Verify expense entries on Schedule E before adding any back to the rental income.
• PITIA calculation: Identify the full amount of the borrower's primary housing expense to assess debt-to-income ratios accurately.
• Document detail matters: All adjustments and rental income figures must be well-supported to meet guidelines and facilitate processing.
• Stay updated: Refer to the Rental Income topic in the Selling Guide for the most current guidelines and requirements related to income calculation and data entry.