Want to Move Without Giving Up Your 3% Mortgage? Here’s how.
Section: Investor Intel
Author: Susan Isaacs, Washington DC Real Estate Strategist
One of the biggest obstacles in today’s housing market isn’t necessarily the price of the next house, it’s the mortgage on the one you already own.
Accidental Landlording Made Easier
Millions of homeowners bought or refinanced when mortgage rates were in the 3% and 4% range. Moving today can mean giving up that extraordinarily cheap financing and replacing it with a considerably more expensive mortgage. That has created an obvious alternative for homeowners who can afford it:
Keep the current house. Rent it out. Buy the next one.
The catch was that qualifying for the mortgage on the next home while still carrying the mortgage on the first was difficult. And using anticipated rent from the departing residence to help qualify could create a particularly awkward chicken-and-egg problem.
Fannie Mae has changed that.
A New Rule for the Home You’re Leaving
On September 2, 2026, Fannie Mae issued Selling Guide Announcement SEL-2026-08, substantially reorganizing its rental-income rules and creating a separate framework specifically for a “departing residence.”
That’s Fannie-speak for a principal residence you’re vacating and converting to an investment property when you purchase a new primary residence.
Under the new rules, the lender can use market-supported rent rather than a lease agreement to determine qualifying rental income from the departing residence.
In fact, Fannie Mae’s new rule is unusually explicit: Lease agreements are not permitted for a departing residence.
Instead, lenders can document market rent using:
Appraisal that includes market rents;
Fannie Mae’s Single-Family Comparable Rent Schedule (Form 1007);
Market-analysis tools such as Zillow, Redfin or MLS data.
If market-analysis tools are used, the lender must obtain at least three comparable rental properties, preferably within the same market area, subdivision or project.
That’s a huge change for someone trying to coordinate a sale, purchase and potential rental conversion at the same time.
The Chicken-And-Egg Timing Problem
Scenario: You’re still living in your current home and shopping for the next one. You’re unsure when you’ll find the right property and when you do, you don’t know if your offer will be accepted. That leaves your settlement and moving date up in the air.
But qualifying for a loan based upon anticipated rent could mean having to get a tenant secured with a signed lease before completing the purchase process. Hard to do if you can’t give the tenant the move-in date required on the lease.
That’s a pretty difficult logistical exercise.
And if your home purchase transaction falls apart? You have a tenant expecting to move into the house you’re still living in and you’re not ready to move out.
Fannie Mae’s new departing-residence framework largely eliminates that problem. Rather than trying to prove what a particular tenant has agreed to pay, the lender can establish what the property should reasonably rent for in the market.
Major stress relief.
How the Math Works
Fannie Mae doesn’t give you credit for 100% of the projected rent. The lender takes the documented monthly gross market rent and multiplies it by 75%. The 25% reduction effectively accounts for expenses and potential vacancy.
Suppose your current home has a documented market rent of $2,400 per month.
75% of $2,400 is: $1,800
Now suppose the property’s monthly principal, interest, taxes, insurance and applicable association dues; collectively, PITIA; total $1,900.
For qualification purposes:
$1,800 qualifying rental income
– $1,900 PITIA
= $100 monthly shortfall
Instead of carrying the entire $1,900 payment against your debt-to-income ratio, you’re potentially dealing with a $100 monthly rental loss.
That’s a totally different qualifying calculation!
There is one limitation, though. If the calculation produces positive adjusted net rental income (profit), Fannie Mae says it can only be used to offset the departing residence’s PITIA, not additional qualifying income.
So if 75% of the market rent were $2,100 against a $1,900 PITIA, you wouldn’t suddenly have an extra $200 of income available to help qualify for the new mortgage. You’ve just eliminated the old property’s housing expense from the qualifying calculation.
There Are Still Guardrails
This isn’t a blanket rule allowing anyone to estimate a Zillow rent and erase an existing mortgage from a loan application. The lender has to document the property’s market rent and retain the supporting documentation in the loan file. When Zillow, Redfin, MLS or another market-analysis tool is used, at least three comparable rentals are required.
Also, and this is a key factor, if the departing residence is being converted to a rental and the lender needs to establish its market rent, the lender can obtain a formal appraisal with a Single-Family Comparable Rent Schedule (Form 1007). The appraiser develops a market-rent opinion from comparable rentals, much as an appraisal develops an opinion of market value from comparable sales.
There is also an important reserve requirement.
If the borrower has less than 12 months of property-management experience (a documented history of owning/managing rental property and receiving rental income for at least 12 months), the lender must verify reserves equal to six months of PITIA on the departing residence. Those reserves are in addition to any other reserves Fannie Mae requires because the borrower owns multiple financed properties.
And borrowers without at least 12 months of property-management experience don’t get to turn a profitable rent calculation into additional qualifying income. The rental income can be used to offset the property’s PITIA, but not beyond it.
In other words, Fannie Mae isn’t pretending that becoming a landlord carries no risk. It’s simply replacing an awkward lease-first requirement with a more workable combination of documented market rent, a vacancy/expense adjustment, limits on the income that can be counted, and reserves.
Better Late Than Never
The policy change would have helped a lot of accidental landlords displaced from federal workforce over the past year, but it’s great to have now. A few years ago, few would probably even have noticed the policy switch. But this isn’t a normal mortgage market and homeowners need options that meet the moment.
The enormous gap between mortgage rates available several years ago and those available today has created the mortgage-rate lock-in effect. Homeowners may want or need a different house, but selling means surrendering financing that could be extremely difficult to replace.
Someone with a 3% mortgage doesn’t just own a house, they also hold a long-term financing obligation with considerable economic value. Until now, homeowners facing that dilemma have largely had three choices:
Stay and sweat it out. Sell and give up the low-rate mortgage. Or become a landlord and hope they can qualify while carrying both properties.
Fannie Mae hasn’t eliminated the financial requirements of that third option with this modified rule, but it has made the logistics considerably more achievable.
This Could Change the Sell-or-Keep Conversation
Keeping a former residence isn’t automatically a good financial decision. There are maintenance costs, vacancy risk, landlord responsibilities, taxes, insurance considerations and the opportunity cost of leaving equity tied up in the property. In DC, becoming a housing provider also brings an assortment of licensing and regulatory obligations that need to be understood, and compliance often means making a small investment in updates to the property.
Some homeowners are still much better off selling.
But for an owner with a low mortgage rate, substantial equity and a property that works well as a rental, the calculation deserves to be made rather than dismissed because financing the next purchase is impractical.
Fannie Mae announced the new rental-income framework September 2, 2026, in Selling Guide Announcement SEL-2026-08. Lenders are encouraged to implement the changes immediately and must implement them for loans with application dates on or after November 1, 2026. Individual lender requirements and borrower circumstances may vary.
Disclaimer
We are not attorneys, legal experts, investment counselors, or CPAs. The content on this channel is presented for informational purposes only and derived from reliable sources, but should not be considered legal, financial, investment, transaction or real estate practice advice. Susan Isaacs and Compass, their principals and/or representatives, do not guarantee or warrant its accuracy, completeness, or applicability to any specific real estate transaction. Homebuyers should read applicable D.C. law and code as part of their due diligence, and seek help from licensed, qualified professionals for interpretation and application to their specific transaction.