Using Airbnb Income for Mortgage Loans and Refinancing

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Although Airbnb rentals have become wildly popular, there isn’t a loan specifically for Airbnb use. However, plenty of financing options are available with rental property investors in mind.

Understand that when trying to secure financing for an Airbnb/short-term rental property, mortgages for investment properties work differently than a loan for your primary residence. 

The biggest of these is that you’ll need a larger down payment to secure the financing, usually a minimum of 15%, and you’ll likely face higher interest rates as well.

The mortgage industry is catching up to the sharing economy, with some lenders letting Airbnb hosts use rental income to refinance home loans. Until this shift, banks and other lenders would hold mortgage refinance borrowers to more stringent requirements if part of their income came from renting out their homes.

Short-term rental income from brokers like Airbnb can be high in the summer and low in the winter, depending on where you live. Many lenders saw this as an increased risk.

Although loans may have been approved in smaller numbers in the past, lenders charged higher interest rates or disqualified customers from mortgage refinancing if they wanted to include rental income in their applications.

That thinking has changed. What was considered an unsteady side gig is now a sign of stability.

As the model has been proven and Airbnb has demonstrated staying power, lenders have followed suit and are relaxing rental income parameters.

It has taken years for regulatory boards such as Fannie Mae to determine that Airbnb rental income can help pay a mortgage. Fannie Mae changed the policy in 2018, and it is now widely considered a powerful tool for economic empowerment among homeowners.

Using a Proof of Income Form for Mortgage Refinancing

Fannie Mae’s regulations require at least one year’s worth of Airbnb income for inclusion in refinancing and only from a primary residence. With one year of Airbnb income, a refinance borrower can use 75% of that amount to qualify.

Two years of Airbnb income allows borrowers to count 100% toward their total income.

A key to the rule change is the verification Airbnb provides to Fannie Mae instead of relying on Airbnb hosts to submit proof on their own. Airbnb now provides lenders with a “proof of income statement.” 

Instead of counting rental income against a borrower as in the past, Airbnb income can lead to a lower interest rate on a home refinance because it’s extra income that lowers their debt-to-income ratio.

Fine Print of the Airbnb Proof of Income Form

Only hosts with the U.S. as their primary country of residence who have one or more active Airbnb listings are eligible to access the Airbnb Proof of Income form. Co-hosts, experience hosts, and hosts whose country of residence is outside the U.S. can’t access the form.

After you submit a request, Airbnb will email you in about five days or so to let you know your Proof of Income is ready to be downloaded.

The Proof of Income form includes your monthly gross earnings and total amount paid for the current year and the previous two calendar years (if applicable). The current year form includes income up to the previous completed calendar month. 

If you uploaded taxpayer information to your Airbnb account, you will get a Proof of Income form for each unique taxpayer ID associated with your account. If you haven’t uploaded taxpayer information to your Airbnb account, your Proof of Income will summarize all earnings for your host account.

The Proof of Income reflects income for each unique taxpayer ID registered to a host account. In contrast, the Earnings Summary and Transaction History reflect the total earnings associated with a host account.

If no taxpayer ID is registered to the host account, then the Proof of Income will reflect the total earnings associated with the host account.

Airbnb Income and Conventional Loans

You may be able to use short-term and long-term rental income on a conventional loan application. Conventional loans can allow you to count rental income you’ve earned in the past or projected future rental income toward the income used to qualify you for a refinance or a mortgage.

Lenders will count 75% of the rental income as qualifying income for your application.

Most of the time, this means income from long-term rental tenants. You’ll need to supply 

documentation of qualified rental income that often relies on leases or the monthly rental market rent. But if you already have a history as an Airbnb host, you can qualify for a loan if you have documentation of past rental income and show it is likely to continue.

What About FHA and VA Loans?

When calculating qualifying income, FHA and VA loans count 75% of your projected future rental income. Rental income is estimated through your rental history or an appraisal, whichever is lower.

It’s doubtful you’ll be able to use future Airbnb income if you’re a first-time home buyer with no track record of short-term rental success.

Aaron Crowe

Aaron Crowe is a seasoned personal finance and real estate journalist. Aaron writes on real estate as it relates to mortgages, refinancing loans and lending for Refi.com.

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