A client earns $60,000 annually and owns a rental property generating $2,000/month in gross rent. The property has $800/month in operating expenses (utilities, property taxes, insurance). How would a prime lender typically 'add back' this rental income when calculating the client's qualifying income, assuming an 80% add-back policy?

Question: A client earns $60,000 annually and owns a rental property generating $2,000/month in gross rent. The property has $800/month in operating expenses (utilities, property taxes, insurance). How would a prime lender typically 'add back' this rental income when calculating the client's qualifying income, assuming an 80% add-back policy?

Answer options:

• Add $2,000 to their monthly income.
• Add $1,600 to their monthly income. ✅ Add $960 to their monthly income.
• Add $1,200 to their monthly income.

Correct answer: Add $960 to their monthly income.

Explanation: Prime lenders typically use 80% of the gross rental income minus 100% of the operating expenses. So, ($2,000 * 0.80) - $800 = $1,600 - $800 = $800. Some lenders calculate a net amount for the rental income then take 50% for qualifying income. For example, some lenders use 50% of the net rental income. This will vary by lenders and specific circumstances.