My lender will not consider my Short Term Rental income

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My lender will not consider my Short Term Rental income

Rental Property Investor · Dallas, TX · Member since 2018 · 26 posts · 17 votes

My lender will not consider income from my short term rentals as part of my Debt to Income Ratio. Any suggestions or workarounds? (Besides submitting a bogus lease for a “long term tenant”... yes this has been suggested... not doing it.)

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Chris MasonPro Member

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Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes

Originally posted by @Jay Hinrichs:

@Chris Mason Chris can you help this Member get his loan done ?

The 12 month lease doesn't have to be bogus. It can be a 12 month lease with your STR property manager. It can/should be a real lease, that happens to allow for subletting, there are a few other little things to watch out for.

In general Fannie/Freddie require 2 years on tax returns for self employment. The exception is real estate landlording, since that's the one form of self employment Fannie/Freddie can claim to actually understand, based on Fannie Mae having over 80 years of loan performance data. When you sign that lease, you're putting yourself in that box that Fannie Mae understands.

That exception has not been extended to include self managed short term rentals. So, for the time being, generally it takes 2 years before income from each new "business" can be counted in the DTI math.

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Ranjith MarappanPro Member
Investor · Herndon, VA · Member since 2017 · 29 posts · 13 votes
7y
Find another lender who will consider the STR income
4 Reply
- Demetrius Potts
  Rental Property Investor · Member since 2022 · 24 posts · 6 votes
  2w
  @Ranjith Marappan I'm looking for this as well. I'm trying to get a personal home loan but the lender is saying income qualifies but my DTI is too high. Won't use any of the income from my STR rental.
  0 Reply
John UnderwoodPro Member
Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
7y
Have you had this income for 2 years or longer? I have heard it needs to be this long to be considered.
Also do you own the property that you are renting as a STR?
1 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
7y
@Chris Mason Chris can you help this Member get his loan done ?
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Jon Crosby
Investor · Roseville, CA · Member since 2016 · 893 posts · 1k+ votes
7y
@Nico C. If you still have active STR's and Scheduled C/E to show them you should really have no issue finding a lender to qualify you. PM if you need a referral and I will be happy to pass along my contact who might be able to help you out.
Best of luck!
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Chris MasonPro Member
Moderator
Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
7y
Originally posted by @Jay Hinrichs:

@Chris Mason Chris can you help this Member get his loan done ?
The 12 month lease doesn't have to be bogus. It can be a 12 month lease with your STR property manager. It can/should be a real lease, that happens to allow for subletting, there are a few other little things to watch out for.
In general Fannie/Freddie require 2 years on tax returns for self employment. The exception is real estate landlording, since that's the one form of self employment Fannie/Freddie can claim to actually understand, based on Fannie Mae having over 80 years of loan performance data. When you sign that lease, you're putting yourself in that box that Fannie Mae understands.
That exception has not been extended to include self managed short term rentals. So, for the time being, generally it takes 2 years before income from each new "business" can be counted in the DTI math.
4 Reply
Eric P.
New York City, NY · Member since 2016 · 470 posts · 348 votes
7y
Originally posted by @Nico C.:
My lender will not consider income from my short term rentals as part of my Debt to Income Ratio. Any suggestions or workarounds? (Besides submitting a bogus lease for a “long term tenant”... yes this has been suggested... not doing it.)
I've seen a few lenders mentioned on BP that will accept STR income less than 2 yrs or even projected income: Host Financial, RNC Capital, Land Brothers. Let me know how it goes if you work with any of them!
0 Reply
Avery CarlBusiness Member
Real Estate Agent · USA · Member since 2016 · 909 posts · 1k+ votes
7y
@Parker Borofsky help this man
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Nicholas Covington
Mortgage Broker · Dallas, TX · Member since 2017 · 657 posts · 275 votes
7y
@Nico C. im assuming you are trying to go full docs with an agency loan to take advantage of rate? Or are you just trying to get the deal done? There are non conventional lenders out there that will use short term rental income, rates just won't be as "attractive."
0 Reply
Nico C.
OP
Rental Property Investor · Dallas, TX · Member since 2018 · 26 posts · 17 votes
7y
@John Underwood
I have not had it for two years - but I am the owner.
0 Reply
Nico C.
OP
Rental Property Investor · Dallas, TX · Member since 2018 · 26 posts · 17 votes
7y
@Chris Mason
So a professionally managed property (which I have) with the firm signing a lease, that allows for sub-letting, is a legitimate work around if we are operating less than a year?
That’s not considered fraudulent?
0 Reply
David Bergmann
Property Manager · Columbia, SC · Member since 2017 · 121 posts · 163 votes
7y
I just talked to a bank about this today. I am in the same situation - I have a property that I own outright they I put some cash into to make Airbnb ready. I have been waiting 6 months to do a cash out refinance based on appraised value. I knew that I was going to likely be pushing the DTI on this, so I have a lease agreement between myself and my LLC. The LLC is technically the leasee and making monthly payments to my personal bank account. The person I spoke with at the bank seemed okay with it as long as I could provide the lease and evidence of the payments (6 month history).
2 Reply
Nancy Mascorro
Real Estate Agent · Los Angeles, CA · Member since 2019 · 58 posts · 11 votes
7y
@John Underwood hello, does it make a difference whether or not you own the property? How will this benefit / hurt you? Hope to hear back from you. Thanks!
0 Reply
Rhonda Blue
Real Estate Broker · East TN Loudon/Lenoir City/Tellico Village · Member since 2014 · 363 posts · 222 votes
7y
Locally I know Smart Bank has worked for investors doing refinance for Short Term rentals.
Best of luck, It's totally not fair that being self employed and independent making your own money
through no assistance from an "employer" and your considered not a good investment. Ridiculous.
0 Reply
Matt Hudson
Nashville · Member since 2019 · 56 posts · 21 votes
7y
@Nico C. I'm going through the same exact thing right now! To be proactive I've called several other lenders and found a handful who are willing to use whatever rental income is reflected in my last 2 tax returns. I'd reccomend calling around to have a backup in case you need to switch gears quickly. Good luck! (To both of us)
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John UnderwoodPro Member
Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
7y
Originally posted by @Nancy Mascorro:

@John Underwood hello, does it make a difference whether or not you own the property? How will this benefit / hurt you? Hope to hear back from you. Thanks!
You have full control if you own the property, unless STR rules changes in your area.
0 Reply
Ken Latchers
Hatfield, PA · Member since 2012 · 1k+ posts · 629 votes
7y
Why is it not fair? 80% of businesses fail. Underwriting uses very specific risk criteria, they're not just picking on particular groups of people.

Originally posted by @Rhonda Blue:

Locally I know Smart Bank has worked for investors doing refinance for Short Term rentals.
Best of luck, It's totally not fair that being self employed and independent making your own money
through no assistance from an "employer" and your considered not a good investment. Ridiculous.
0 Reply
Ken Latchers
Hatfield, PA · Member since 2012 · 1k+ posts · 629 votes
7y
I bought two properties recently without any short term rental income. I used local small Banks. Each property had long term rental history, and both Banks knew full well that I intended to convert them to short-term. They didn't even bat an eye.
1 Reply
Ian WalshBusiness Member
Lender · Philadelphia, PA · Member since 2016 · 2k+ posts · 1k+ votes
7y
Perhaps see if private/hard money is a fit for your goals.
0 Reply
Account Closed
Las Vegas, NV · Member since 2018 · 100 posts · 140 votes
7y
If using property management, ensure ALL the rental income is paid to you , not minus their fee, you want to pay that separately as you do any other expense
The rental income belongs to you, it’s yours to use how you wish to allocate any payments
It may only be $100, but if financing numbers are tight, and you have 10 properties, it’s $12k a year “more” rental income turnover
Banks love turnover, the higher the better, they do not know if you made a profit, moreover, they do not care !!, they have your money !
0 Reply
Karen CubberleyBusiness Member
Realtor · Sevierville, TN · Member since 2026 · 18 posts · 1 vote
1w
Great question!

This is a challenge many short-term rental investors face, especially when trying to expand their portfolios.

As STR owners and real estate professionals specializing in investment properties here in the Smoky Mountains, Shelly and I always encourage investors to explore financing options beyond traditional lenders.

🏡 A few options worth looking into:

✅ DSCR Loans (Debt Service Coverage Ratio) – These loans generally focus more on the property's income potential than your personal debt-to-income ratio. However, lenders vary in how they evaluate STR income, and some may require long-term rental estimates instead.

✅ Portfolio Lenders – Local banks and credit unions that keep loans in-house may have more flexibility when evaluating rental income.

✅ STR-Friendly Mortgage Lenders – Some lenders have programs specifically designed for vacation rental investors and may consider documented STR income, depending on the loan program.

✅ Tax Returns & Rental History – If you have established STR income, ask whether the lender can use your Schedule E, tax returns, or other acceptable documentation to qualify you.

💡 My biggest suggestion? Don't assume one lender's guidelines apply to every lender!

And I absolutely agree with your decision not to submit a fictitious lease. There's no investment worth committing mortgage fraud over.

The right financing strategy can make a significant difference when building an STR portfolio.

💬 I'm curious: Is your lender refusing to consider STR income altogether, or are they requiring a longer rental history before they'll count it?

That distinction could help determine which financing options are worth exploring.

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Erik EstradaBusiness Member
Lender · Member since 2022 · 6k+ posts · 1k+ votes
1w
Hi Nico,
If this is a full document loan, most lenders will use the qualifying income reported on your schedule E. If you are open to explore other financing, there are many DSCR lenders that can lend on STRs specifically. Best of all is that they do not look at your personal income taxes to qualify.
Happy to chat and connect!
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