Vacation Rental Qualification

[Michael Osborne]

I am interested in purchasing a vacation rental in the near future. When qualifing for the mortgage is the historic rental income counted towards qualifying for the mortgage? In this scenario the historic annual tent is $50k. The mortgage, insurance, tax, and rental management would be about $40k a year. Probably not the best investment return so not really concerned with that just curious how qualify

[Louis Barkhuizen]

Morning all. Be careful using a "second home" as a vacation rental if you are using conventional financing. Fannie Mae states the following:

Fannie Mae’s April 3 clarification of the “Second-Home Rider” shows that homeowners are allowed to rent out a second home after one year of ownership and that short-term renting during the first year is also permitted under specific conditions

The following eligibility requirements apply to second home Mortgages:
·The Mortgage must be secured by a 1-unit property
·The Borrower must occupy the second home for some portion of the year
·The Borrower must keep the property available primarily (i.e., more than half of the calendar year) for the Borrower's personal use and enjoyment
·The Borrower may rent the property on a short-term basis provided that the property is not subject to any rental pools or agreements that require the Borrower to rent the property, give a management company or entity control over the occupancy of the property, or involve revenue sharing between any owners and the developer or another party
·The Mortgaged Premises must be in such a location to function reasonably as a second home
·The second home must be suitable for year-round occupancy with the following exception: a second home with seasonal limitations on year-round occupancy (e.g., lack of winter accessibility) is eligible provided the appraiser includes at least one comparable sale with similar seasonal limitations to demonstrate the marketability of the subject property. See Section 5601.2 for general property eligibility requirements.
The property must not be subject to any timesharing or other shared ownership arrangement

So it is possible, but there are some limiting rules. Most notably, the property has to be available to the owner for use (ie not booked out as a STR) most of the year, and that you cannot pay a professional property manager to manage the place.