Lenders for Renting Out a Second Home/ Vacation Home

Short-Term & Vacation Rental Discussions
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Lenders for Renting Out a Second Home/ Vacation Home

Alexandra Widowfield
Member since 2021 · 3 posts · 1 vote

Hi everyone! I am looking to purchase a second home and while I will stay there for at least a few weeks a year, I want the option to rent the property on Airbnb. That being said, I am struggling to find a lender that has worked on this before. Some lenders say that if you only rent it out a "little bit" then it can be a second home, but won't specify how much out of the year would qualify as a "little bit." Another lender has said that Airbnb qualifies as a management company and because of that the property would have to be an investment property. I currently own my own home and have an investment property that does long-term rentals. Any advice on how to find a lender that allows short-term rentals in second homes? THANKS SO MUCH.

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Lauren Kormylo
Rental Property Investor · Phoenix, AZ and Rehoboth Beach DE · Member since 2019 · 1k+ posts · 1k+ votes
4y

Another thread about that topic. https://www.biggerpockets.com/...

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  • John UnderwoodPro Member
    Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
    4y

    From their point of view it is either a 2nd home or a rental.

    0Reply
  • Quinn OlivarezBusiness Member
    Real Estate Agent · Houston, TX · Member since 2021 · 115 posts · 131 votes
    4y

    Honestly, just ask around. Start with local lenders that pique your interest, and move on to some of the bigger firms after that. Every lender can potentially have different terms, whether it’s the distance between your primary home and the vacation property, or the frequency of time you must spend there. I reached out to lenders that have assisted clients of mine, my current primary home mortgage lender and two of the big companies. I ended up choosing to go with my current primary mortgage lender, after doing due diligence. Don’t be afraid to ask lenders directly, only they can help you with this.

    [email protected]832-607-2941
    Quinn Olivarez @ J. Lindsey Properties57 Reviews
    WebsiteView Page
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  • John UnderwoodPro Member
    Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
    4y

    You should be able to do a 20% down conventional loan if you have proper DTI.

    0Reply
  • Luis Silva
    Residential Real Estate Broker · Sacramento, CA · Member since 2014 · 54 posts · 23 votes
    4y

    @Alexandra Widowfield lenders will view a short term rental as an investment home. To be a true second home, it usually will need to be more than 50 miles from your primary home and either near a tourist attraction, lake, near family, etc. Many times the lender will require a letter of explanation to confirm its use/occupancy. You will have to intend to live in it for a period of time over the year.. but the rental income that you mentioned to them will most likely make them say it will need to be reclassified as investment home.

    FYI- loan level pricing adjustments on second homes are changing April 1st this year which means rates are going to go up on a second home (pretty dramatically actually). If you search FHFA second home, you should be able to locate the announcement.

    1Reply
  • Lauren Kormylo
    Rental Property Investor · Phoenix, AZ and Rehoboth Beach DE · Member since 2019 · 1k+ posts · 1k+ votes
    4y

    Another thread about that topic. https://www.biggerpockets.com/...

    2Reply
  • Colleen Cupp
    Real Estate Agent · Rowlett · Member since 2021 · 29 posts · 24 votes
    4y

    I used rocket mortgage. I know everybody says not to use them but my experience was pleasant. I told them that we would use the property but that we would rent it out when not there to “help cover the expenses” and they were fine with it. 

    1Reply
  • Amy Beth
    Rental Property Investor · Edison, NJ · Member since 2016 · 753 posts · 565 votes
    4y

    I purchased a home using a second home mortgage a few months ago.  I had to write a letter reporting that I intend to stay there at least two weeks per year to qualify.  The lender knew that I would be renting it out as a short term rental otherwise. I was told that I could do this since the house was in a resort community and not nearby to my home.  I found my lender through my real estate agent so I would encourage you to ask local real estate agents for a lender whom they recommend.  My lender was with wells fargo. I did also ask my primary mortgage company and they would only do an investment loan so not everyone will do it.

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  • Reid Chauvin
    Lender · Nashville TN - Licensed in AL AR DC FL GA LA MD TN, TX and VA · Member since 2021 · 583 posts · 338 votes
    4y

    A lot of the confusion comes down to how Lender's (and in reality their underwriters) interpret Fannie/Freddie guidelines on second home, which are fairly vague. You MUST occupy the home for some portion of the year and you definitely CANNOT use projected renal income to help you qualify. You cannot have any sort of agreement in place with a management company or for a timeshare. 

    Here's Fannie's guidelines: What is required for a second home? (fanniemae.com)

    0Reply
  • Tyler Cotter
    Member since 2021 · 32 posts · 12 votes
    4y

    Hello Alexandra, 

    Where's the vacation property going to be? I'd love to chat further. Ill send you a message and see if I can assist. 

    0Reply
  • Bryce Bunton
    Investor · Saint Louis, MO · Member since 2014 · 26 posts · 7 votes
    4y

    Make sure you call it a 2nd home, not a vacation rental or investment property, your language matters. You should be able to purchase with 10% down. Gateway Mortgage does this with 10%, we are doing one with them in Orlando right now.  I originally worked with Jeff Chisum (tenpercentdown.com) but his team has now moved to Northpointe and they have lots of products too. I'd check them out for sure.  Good luck.

    0Reply
  • Alexandra Widowfield
    OP
    Member since 2021 · 3 posts · 1 vote
    4y

    Thank you everyone!! All of these replies help a ton. Much appreciated!

    0Reply
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