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Airbnb Loans: What Types Are Available?

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Content was accurate at the time of publication.

“Airbnb loans” are mortgages you can use to buy property you’ll then list on a short-term rental website. The payoff can be significant: The average Airbnb host earns $14,000 a year.
But any time you’re buying real estate and not planning to live in it yourself, you’re purchasing an investment property — which can be more challenging to finance than a primary residence. We’ll show you several options for Airbnb financing and cover the most important things you need to know as you shop for loans.

Conventional Airbnb loans

A conventional loan is one that’s not part of a government-backed mortgage program. Many of these loans are backed by Fannie Mae or Freddie Mac.

You can get a conventional loan for an investment property, meaning that you rent it out on Airbnb and don’t live in it. Or, you can buy a property that you’ll live in while you host Airbnb guests in the home’s extra space. However, investment properties have higher down payment requirements and credit score minimums, and they also require you to have cash reserves to cover vacancies and maintenance costs.

Conventional investment property loansConventional primary residence loans

 Down payment: 15%
 Credit score: 640 or higher
 Cash reserves: Equal to two to six months of mortgage payments
Can't use gifts to fund your down payment

 Down payment: 3%
 Credit score: 620 or higher
 Cash reserves: Not required
Can use gifts to fund your down payment

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Government-backed Airbnb loans

Loans backed by the U.S. Department of Veterans Affairs (VA loans) and Federal Housing Administration (FHA loans) both offer programs to finance a multifamily home that you can rent out on Airbnb — but there are some major catches:

  1. You must live in one of those units for at least a year
  2. You can’t offer stays shorter than 30 days (FHA loans only)
  3. You must be a qualified military borrower (VA loans only)

While these restrictions may feel limiting, if you’re wondering how to buy Airbnb property with no money down, it’s worth considering these government-backed multifamily loans. Their down payment requirements are the lowest you’ll find.

FHA multifamily loansVA multifamily loans

 Down payment: 3.5% to 10%
 Credit score: 500 minimum with 3.5% down payment, 580 minimum with 10% down
 Cash reserves: One month's worth of mortgage payments for one- to two-unit properties; three months' worth of payments for three- or four-unit properties

 Down payment: 0% (with full VA entitlement)
 Credit score: No minimum, but most lenders require 620 or higher
 Cash reserves: Up to six months' worth of mortgage payments


Why can't you use FHA loans to buy a property for short-term Airbnb rentals?

The U.S. Department of Housing and Urban Development (HUD), which oversees the FHA, doesn’t allow multifamily residential units to be rented for less than 30 days at a time or to be used for “transient or hotel purposes.” An Airbnb would qualify as using the home for “transient or hotel purposes,” so you may be violating the terms of your loan agreement if you use a home purchased with an FHA loan as a short-term Airbnb.

Conventional loans

Conventional investment property loansConventional primary residence loans

May be able to use short-term rental income on your application
May be able to use long-term rental income on your application

Typically not allowed to use short-term rental income on your application
May be able to use long-term rental income on your application

Conventional loan programs can allow you to count either rental income you’ve earned in the past or projected future rental income toward the income used to qualify you for a mortgage. Lenders will count 75% of the rental income as qualifying income for the purposes of your application.

This usually means long-term rental income from tenants, though, not the short-term renting that’s typical of Airbnb stays. For that reason, documentation of qualified rental income — especially when estimating rent expected in the future — usually hinges on leases and/or monthly market rent.

On the other hand, if you already have a history as an Airbnb host, you can use the money you’ve earned to qualify for a loan on a new property if:

  • You have documentation of past rental income with a lease
  • You can show that this income is likely to continue

It’s rare, but some lenders may have special programs to help you refinance a primary residence you’ve been using as an Airbnb. In those cases, you can count the short-term rental income made through Airbnb at your single-unit primary residence. You’ll need to get a Proof of Income form from Airbnb to share with your lender.


What about income earned from an accessory dwelling unit (ADU)?

Fannie Mae’s HomeReady® program lets you use income earned from an ADU on a single-unit primary residence as a portion of your qualifying income, as do all Freddie Mac loans.

FHA loans and VA loans

FHA multifamily loansVA multifamily loans

Can't use short-term rental income on your application

Can't use short-term rental income on your application

Both FHA and VA loans will count 75% of your projected future rental income when calculating your qualifying income. That rental income is estimated through an appraisal or actual rental history, whichever is lower.

In addition, VA multifamily loans require you to prove that you have experience renting properties or are likely to succeed as a landlord.

Unless you’re going to use a VA loan and have full VA entitlement, you’ll need a down payment for your Airbnb property. One way to finance this is to tap into the home equity of a home you already own, but you can also use loans that aren’t tied to a home.

Cash-out refinance

A cash-out refinance can be a good option for accessing a large amount of cash, as long as current refinance rates allow you to lower your mortgage rate.

With a cash-out refinance, you replace your current mortgage with a new one. The new mortgage is more than the amount you owe, giving you cash to put down on an investment property.

Cash-out refinance loan requirements

 Loan limit: 80% of your home's value
 Credit score: 620 or higher
 Closing costs: 2% to 6% of your loan amount

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Home equity loan

Another option for funding the down payment on an Airbnb is a home equity loan. With a home equity loan, you get a lump sum of cash and make monthly payments until it’s paid in full.
A home equity loan is secured by your home. Lenders consider them riskier investments than a traditional mortgage, which means the interest rate is generally higher than it would be for a cash-out refinance or purchase mortgage.

Home equity loan requirements

 Loan limit: 85% of your home's value
 Credit score: 620 or higher
 Closing costs: 2% to 5% of your loan amount

Home equity line of credit

A home equity line of credit (HELOC) is another way to use your equity to fund a down payment on an Airbnb property. Like a home equity loan, it’s also secured by your house, but you’ll have access to a credit line instead of a lump-sum payment.

HELOCs have two phases: the draw period and the repayment period. You can use as much or as little of your credit line as you like during the HELOC draw period, which typically lasts 10 years. After the draw period, the HELOC enters the repayment period, which usually lasts 15 to 20 years. You must pay back what you’ve borrowed, with interest, and you can no longer borrow against your credit line.

HELOC requirements

 Loan limit: 85% of the home's value
 Credit score: 620 or higher
 Closing costs: 2% to 5% of your loan amount
 Fees: May be required to pay annual maintenance and membership fees

Hard money loan

Hard money loans are short-term loans issued by a private lender, backed by real estate and generally used for investment purposes.

Using a hard money loan for an Airbnb can grant you access to properties traditional loans won’t finance, such as that treehouse in the woods that just begs to be listed on a rental site. In addition, approval can be faster — typically just a few days.

On the downside, interest rates and origination fees can be high. The repayment period is also usually short, sometimes only as long as one year. And since you’ll often only be required to pay interest during the loan term, you’re looking at a large balloon payment when the term ends. You’ll need a rock-solid plan for repayment before choosing this option.

Hard money loan requirements

 Loan limit: 65% to 75% of the property's value
 Credit score: Many lenders don't have a minimum requirement
 Fees: Origination fees are often high and prepayment penalties may apply

There’s a lot more to buying property for an Airbnb than financing it. Here are some other considerations:

  • Is it legal?
    It’s important to know if Airbnb is allowed in your area, as some cities have strict rules for short-term rental properties. For example, it’s illegal in New York City to rent out an entire property — and you have to be present if you want to rent out a room. Other cities, like New Orleans and San Francisco, limit how many days you can rent on Airbnb per year. If you’re not sure about your local laws, it’s a good idea to speak to a real estate attorney experienced in landlord-tenant law.
  • Do you have the appropriate insurance?
    Airbnb offers its own insurance that can help with damages, but your homeowners insurance may require you to have additional coverage when renting out a property. It’s best to discuss this with your insurance company to get all the details.
  • How much Airbnb income should you expect?
    Research comparable Airbnbs in your area to get a sense of how much they typically rent for and how often they’re rented out. Compare these numbers to your financing options.
  • How much will running an Airbnb cost?
    In addition to cleaning and maintenance, keep in mind that Airbnb charges a host fee. The company’s site says this fee is usually around 3%, but can be higher for hosts with properties in Italy, as well as those with “super strict” cancellation policies. (These cancellation policies require guests to cancel a reservation 30 or 60 days ahead if they want to get any of their money back.)
  • Is it convertible to a long-term rental?
    What if the laws change in your area and Airbnbs are no longer allowed? It’s worth researching before you buy to find out what similar rentals in the area can bring in on the long-term rental market. This gives you an idea of how much you could earn if you can’t use the short-term rental model that Airbnb made famous. A real estate agent can assist you with finding comparable properties.

If you’re allowed to sublease part of a space you rent, you could host Airbnb guests legally. However, you should check your lease or rental agreement first, because it’s common for landlords to prohibit renters from using their property for business purposes. The best way to rent out an Airbnb without owning property is to have a landlord who is fully on board with the idea.

Yes, you can. Airbnb has no rules against renting space in a property with a mortgage on it. Local laws and homeowners association (HOA) bylaws may prohibit Airbnbs in certain cases, but that usually has no connection with whether the home still has a mortgage.

You typically can’t buy an investment property without a down payment. There’s more at risk for lenders if they’re loaning money for homes that aren’t a primary residence — it’s easier for you to let go of the property since you don’t live in it. As such, lenders compensate for additional risk by requiring a higher down payment.

However, if you’re willing to live at the property you’re renting out on Airbnb and are a military borrower with full VA entitlement, you can qualify for a mortgage with no down payment. You can then use a strategy called house hacking to offer rentals on Airbnb.

Typically, investment property rates are 50 to 87.5 basis points higher than primary homes. For example, if an owner-occupied home has a 7.30% interest rate, an investment property may have a rate of 7.80% to 8.175% for the same loan term.

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