FHA announces the publication of Mortgagee Letter (ML) 2025-04, Revisions to Policies for Rental Income from Boarders of the Subject Property, and a stakeholder briefing webinar. 

This ML considers stakeholder feedback received on the draft ML announced in FHA INFO 2024-79, dated November 20, 2024. 

The provisions announced in this ML create greater flexibilities for borrowers who use the income received from individuals who rent space in borrowers’ homes—referred to as boarders in Single-Family Housing Policy Handbook 4000.1 (Handbook 4000.1)—to qualify for an FHA-insured mortgage. 

These new flexibilities include revisions to the required underwriting standards for documenting and calculating this type of income.  

 FHA remains committed to extending affordable housing opportunities to its core constituency of first-time and low-to-moderate-income homebuyers, including those in underserved communities. 

FHA recognizes that rental income from individuals renting space in borrowers’ homes is a stable and viable source of income that increases housing affordability and allows borrowers to manage housing costs better.  

This new underwriting guidance:   

  • Expands the types of acceptable income verification documentation for individuals renting space inside the home to include bank statements, canceled checks, and/or deposit slips showing rental payments received;  

  • Establishes that rental income from individuals renting space inside the subject property is permitted, whether the borrower is currently a renter or the homeowner;  

  • Reduces the acceptable rental income history from two years to 12 months from individuals renting space inside the borrower’s home;  

  • Allows borrowers with a 12-month rental history to qualify for an FHA-insured mortgage using income from renters living in the home, provided the income has been received for at least nine of the most recent 12 months, is currently being received, and is averaged over a 12-month period; and   

  • Establishes that rental income from individuals renting space inside the home to qualify borrowers for an FHA-insured mortgage cannot exceed 30 percent of their monthly effective income. 

The provisions of this ML may be implemented immediately but must be implemented for FHA case numbers assigned on or after March 14, 2025. and will be incorporated into a future version of Handbook 4000.1. 

To further support mortgagees, the FHA will host a stakeholder briefing (see details below). A Frequently Asked Questions (FAQ) document compiling questions received through the briefing and FHA Resource Center will be available on hud.gov and announced in a future FHA INFO. 

Mortgagees and other interested parties are encouraged to thoroughly review ML 2025-04 and contact the FHA Resource Center (referenced below) with questions.