Short Term Rental Income From Primary Residence?

Question

Greetings all,

I have been told by two lenders now that you can NOT use STR income from a primary residence to qualify for a loan. The income is documented on Schedule E. They WILL use the STR income from my non-primary residence to qualify (also on schedule E).

Both lenders claim these are Fannie/Freddie guidelines and not the result of the an overlay. Has anyone been able to overcome this obstacle?

Chris Mason · Answer

This needs to be forced into a bucket that FNMA understands.

Schedule C. Kyle Moore Residential and Vacation Services. 2 years tax returns. Business license or other 3rd party proof that the business still exists as of when you apply for the mortgage (CPAs don't write these letters, these days). All of it honestly reported, no one is suggesting lying on your tax returns.

A SFR primary residence showing rental income on Schedule E = error error does not compute error error bleep bloop splooosh. SFR stands for single family residence, not 50 families cycling in and out, FNMA does not understand that concept (it is irrelevant that I personally do understand it), and I'm guessing your house isn't zoned as a hotel or hostel either (which is the question, and answer, if you bark up the commercial loan tree, which I have indeed done).

You can also bark up several dozen trees, ordering several dozen appraisals, until an underwriter says "yes" when they should say "no." They are human and capable of error.