Does vacation-rental income qualify for lending purposes?

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Does vacation-rental income qualify for lending purposes?

Tyler WarnePro Member
Real Estate Broker · Helena, MT · Member since 2016 · 65 posts · 28 votes

I am writing an article and I am an appraiser and looking for primary data. Curious if anyone has a lender that is lending based on this income, are they commercial lenders? Did you need to provide 2 years experience? Anyone accomplish this through a residential lender? 

Thank you for any feedback

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Stephanie MedellinBusiness Member
Mortgage Broker · CA · Member since 2014 · 1k+ posts · 642 votes
7y

@Tyler Warne  Yes, I know of (at least) two lenders offering non-QM loans based on short term rental income - they will take a 12 month average based on documentation from online services like AirBNB.  These are loans based solely on the rental income of that particular property (not on personal income), so rates will be slightly higher, and you do need some equity to refinance based on this income.  You wouldn't be able to use anticipated short term rental income for a purchase because you do need to document a 12 month history of receipt.

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  • Aaron H.
    Rental Property Investor · Steamboat Springs, CO · Member since 2017 · 255 posts · 154 votes
    7y

    Most lenders care about what you report on your taxes. If you have a tax return that shows the vacation rental income, they can count it. Many commercial lenders will still be able to take a look at a deal and count rental income even if you haven't reported it yet. But there's no hard and fast rule - it will differ dramatically from lender to lender.

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  • Stephanie MedellinBusiness Member
    Mortgage Broker · CA · Member since 2014 · 1k+ posts · 642 votes
    7y

    @Tyler Warne  Yes, I know of (at least) two lenders offering non-QM loans based on short term rental income - they will take a 12 month average based on documentation from online services like AirBNB.  These are loans based solely on the rental income of that particular property (not on personal income), so rates will be slightly higher, and you do need some equity to refinance based on this income.  You wouldn't be able to use anticipated short term rental income for a purchase because you do need to document a 12 month history of receipt.

    [email protected]
    Stephanie Medellin, Loan Factory58 Reviews
    WebsiteView Page
    1Reply
  • Tyler WarnePro Member
    OP
    Real Estate Broker · Helena, MT · Member since 2016 · 65 posts · 28 votes
    7y

    @Stephanie Medellin, Thank you for the info! Are these like 200 basis points higher? Is it through a residential lender or handled in the commercial space? Thanks! 

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  • Stephanie MedellinBusiness Member
    Mortgage Broker · CA · Member since 2014 · 1k+ posts · 642 votes
    7y

    @Tyler Warne For pricing, yes more or less around 200 basis points higher. For someone with really good credit at 70% LTV, I just did a comparison and I would say it's closer to 1.75% higher in rate than a full doc conventional loan. This can change based on a few factors such as how well the property cash flows / LTV / credit score / amount of reserves / loan amount, but 30 year fixed rates are available, which is great. These are residential lenders that we broker to, not commercial.

    [email protected]
    Stephanie Medellin, Loan Factory58 Reviews
    WebsiteView Page
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