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Airbnb/Vacation Rentals – Can Lenders Use Income? Are They Allowed?

Airbnb/Vacation Rentals - Can Lenders Use Income? Are They Allowed?

When buyers purchase multiple unit properties or single family rentals, they can use future rents to help qualify for the purchase, as I mentioned in Friday’s blog.

Multiple unit buyers can use the market rents from units to qualify even if the units are vacant.

Similarly, investors, purchasing a single family residence, can also use future market rent (as estimated by the appraiser) to qualify even when the property is vacant.

In light of all this, we often get questions about properties being used as Airbnb or VRBO rentals.

ALLOWABLE USAGE AND OWNER OCCUPANCY

Most lenders have no issue when properties are available on Airbnb, VRBO and other vacation-rental websites.

Lenders will, however, have an issue if a buyer is seeking “owner-occupied” financing (in the case of a refinance for example) and the property is clearly available year-round as a vacation rental.

Owner occupants need to occupy a property for over six months per year, and yes, underwriters do research properties via a variety of sources to validate property usage.

USING VACATION RENTAL INCOME TO QUALIFY – GOTTA BE ON TAX RETURNS

Vacation rental buyers and owners cannot use future rents to qualify no matter how strong the vacation rental market might be.

Vacation rental owners can only use vacation-rental-income to help qualify for a mortgage loan if the income is clearly shown on tax returns.

Lenders can get by with income on only one year of tax returns for Fannie Mae (conforming) loans, but they will need to see income on two years of returns (to show a sufficient “history”) for most other types of mortgage loans.

Things may change as vacation rentals become more and more common, but right now – it’s all about a borrower’s tax returns.

NON-QM

There are some Non-QM lenders (the new quasi-subprime) touting their ability to finance vacation rentals, but they either need to see income on tax returns too or the financing is no more favorable than other Non-QM financing (requiring large down payments and higher rates).

So, the promises of these programs are often over-stated.

Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 01524255, NMLS# 335646