FHA’s New Income Policy: Boosting Your Mortgage Options in 2025 

Are you renting out a room to a friend or family member? That extra income could now help you qualify for a mortgage! The Federal Housing Administration (FHA) has introduced an exciting new policy that makes it easier for homebuyers to include roommate (or “boarder”) rent as part of their qualifying income when applying for a mortgage loan. 

What’s Changed for Mortgage Applicants? 

Announced in January 2025 and effective for FHA case numbers issued after March 14, 2025, this policy update (Mortgagee Letter 2025-04) is great news for first-time homebuyers and anyone looking for the best mortgage lenders in your area. 

Why did FHA make this change?

They recognized that more people are sharing living spaces to manage housing costs. “House hacking” (buying a home and renting out rooms to help cover the mortgage) has become increasingly popular, especially among younger buyers facing affordability challenges in today’s housing market. 

Key Benefits for Homebuyers 

Working with a knowledgeable mortgage broker who understands these new rules can significantly impact your homebuying power: 

• Only 12 months of rental history is needed (down from 2 years) 

• More flexible documentation options (bank statements, canceled checks, etc.) 

• Works whether you currently rent or own 

• Can increase your purchasing power by thousands of dollars 

How the New Policy Works 

When you work with a mortgage lender under this new policy, here’s what you need to know: 

Qualification Requirements 

1. 12-Month History: You must have lived with your roommate for at least 12 months and received rent during that time. 

1. Consistent Payments: You need to show rent payments for at least 9 of those 12 months. 

1. Shared Address Proof: Your roommate must live with you (not just sending you money). 

1. Continued Arrangement: Your roommate must agree in writing to continue living with you in the new home. 

1. 30% Income Cap: Boarder rent can only account for up to 30% of your total qualifying income. 

Required Documentation 

A good mortgage loan officer will help you gather: 

• Proof of 12-month rental history 

• Evidence of rent received for at least 9 months (bank statements, checks, etc.) 

• Address verification showing you and your roommate share a home 

• Signed boarder agreement outlining future rental terms 

How Lenders Calculate Your Income 

Lenders will calculate your eligible boarder income using the lower of: 

• The average monthly rent you received over the past 12 months 

• The amount stated in your current boarder agreement 

For example: If you’ve been collecting $800/month but plan to charge $900 in the new home, lenders will use the $800 figure. 

Real Impact for Homebuyers 

This policy change can significantly increase your purchasing power. In one example, a buyer with $6,000 in monthly income could qualify for approximately a $260,000 home on their own. By adding $800/month in documented roommate income, that same buyer could potentially qualify for a $310,000 home – a $50,000 increase! 

For many people facing competitive housing markets and higher interest rates, this extra buying power could make the difference between continuing to rent and owning a home in a desirable neighborhood. 

Planning Ahead Is Key 

If you’re interested in using boarder income to help qualify for an FHA mortgage loan: 

1. Start documenting now: If you already have a roommate, start keeping formal records of their rent payments. 

1. Consider adding a roommate: If you’re planning to buy in a year, consider finding a roommate now to establish the required 12-month history. 

1. Consult a professional: A good mortgage broker can help you navigate these new guidelines and determine if this strategy makes sense for your situation. 

1. Remember it’s supplemental: While roommate income helps, you’ll still need good credit and stable personal income to qualify. The roommate rent is a boost, not the foundation of your application. 

Finding the Right Mortgage Partner 

Working with a knowledgeable mortgage lender who understands these new FHA guidelines is crucial. An experienced mortgage loan officer can help determine if your roommate’s situation qualifies and guide you through the documentation process. 

Many construction loans also follow FHA guidelines, so this policy could potentially help with new build financing too. 

Bottom Line 

FHA’s new boarder income policy opens doors for many prospective homebuyers, especially first-time buyers and those in shared living arrangements. By formally recognizing roommate rent as qualifying income, FHA has created a pathway for more people to achieve homeownership in today’s challenging market. 

If you have questions about using roommate income to qualify for a mortgage or want to explore your options with this new policy, contact us today. We can help you determine if this strategy might be your ticket to homeownership in 2025. 

Note: This information is provided for educational purposes. Individual qualification requirements may vary. Always consult with a licensed mortgage professional regarding your specific situation.