Appraisal Form - FHLMC 998, FNMA 216 - HUD, FHA, FNMA, GNMA, and FHLMC

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Operating Income Statement form. This form is used for One to Four-Family investment property and Four-Family Owner-Occupied property appraisal reports.

  • Operating Income Statement (Form 216)

Use of Form 216:

The lender should use this form to determine the amount of operating income that can be used in evaluating the applicant's credit on applications for conventional mortgages that are secured by one-family investment properties and all two- to four-family properties (including those in which the applicant occupies one of the units as a principal residence).

This form must be printed on legal size paper, using portrait format.


This form is prepared either by the loan applicant or the appraiser. If the applicant prepares the form, the appraiser must also include his or her comments about the reasonableness of the projected operating income of the property. The lender should retain the original of the completed form and the appraiser should retain the copy. The lender's underwriter uses the second page of the form to calculate monthly operating income and net cash flow for the property, and to explain any adjustments he or she made to the applicant's figures.

Rent Schedule:

The applicant (or appraiser) should complete this schedule by entering the current rents in effect, as well as market rents. Rental figures should be based on the rent for an "unfurnished" unit. The applicant should indicate which utility expenses he or she will provide as part of the rent and which must be paid separately by the tenants.

Income and Expense Projections:

The applicant (or appraiser) should complete all items that apply to the subject property, and should provide actual year-end operating statements for the past two years.

If the applicant prepares the Operating Income Statement (Form 216), the lender should send the form and any previous actual operating and expense reports the applicant provides to the appraiser for review and comment. If the appraiser completes the form, the lender should make sure the appraiser has the operating statements; any expense statements related to mortgage insurance premiums, owners association dues, leasehold payments, or subordinate financing payments; and any other pertinent information related to the property.

The lender's underwriter should carefully review the applicant's (or the appraiser's) projections (and, if the applicant prepared the form, the appraiser's comments concerning those projections). Based on the appraiser's comments, the lender should make any necessary final adjustments for inconsistencies or missing data.

Specific instructions for completing the projections for effective gross income follow. When the applicant will occupy one of the units of a two- to four-family property as a principal residence, income should not be calculated for the owner-occupied unit.

  • Annual Rental at 100% Occupancy. Multiply the total monthly rental shown in the rent schedule by 12. If the lender disagrees with the applicant's figures, the reasons for the disagreement should be documented in writing.
  • Positive Adjustments. Any additional income should be added to the rental income. The source of that income--such as parking, laundry, etc.--should also be shown.
  • Negative Adjustments. The income should be reduced by the annual dollar amount of rent loss that can be expected as the result of anticipated vacancies or uncollectible rent from occupied units.
  • Specific instructions for completing the projections of operating expenses follow. Any operating expenses that relate to an owner-occupied unit in a two- to four-family property should not be included.
  • Heating, Cooking, Hot Water. If any of these items are provided by the applicant as part of the rent for a unit, the projected cost and type of fuel used should be included. When the costs for heating relate to public areas only, an appropriate notation should be made.
  • Electricity. This should include only those projected expenses that will be incurred by the applicant over and above any similar expense for heating, cooking, or hot water already taken into account. If the expense relates to the cost of electricity for public areas only, an appropriate notation should be made.
  • Water/Sewer. These projected expenses should not be included when they are part of the real estate tax bill or when the units are serviced by an on-site private system.
  • Casual Labor. This includes the costs for public area cleaning, snow removal, etc., even though the applicant may not elect to contract for such services.
  • Interior Paint/Decorating. This includes the costs of contract labor and materials that are required to maintain the interiors of the living units.
  • General Repairs/Maintenance. This includes the costs of contract labor and materials that are required to maintain the public corridors, stairways, roofs, mechanical systems, grounds, etc.
  • Management Expenses. These are the customary expenses that a professional management company would charge to manage the property.
  • Supplies. This includes the costs of items like light bulbs, janitorial supplies, etc.
  • Total Replacement Reserves. This represents the total average yearly reserves that were computed in the "Replacement Reserve Schedule" portion of the form. Generally, all equipment that has a remaining life of more than one year--such as refrigerators, stoves, clothes washers/dryers, trash compactors, etc. - should be expensed on a replacement cost basis - even if actual reserves are not provided for in the operating statement or are not customary in the local market.

Operating Income Reconciliation:

The first formula in this section is used to determine the monthly operating income for a two- to four-family property when one unit is occupied by the applicant as his or her principal residence. The monthly operating income should be applied either as income or debt in accordance with the instructions on the form.

Both formulas must be used to determine the net cash flow for a single-family investment property or for a two- to four-family property that the applicant will not occupy. The net cash flow should be applied as either income or debt in accordance with the instructions on the form.

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