Can Income from Your Vacation Rental Help You Qualify for a Mortgage?

Mortgage and Lending with Guaranteed Rate, Marin County, CA NMLS: 22343

Can Income from Your Vacation Rental Help You Qualify for a Mortgage?


Ok.  I'm going to go out on a limb here and say that someone reading this post has, at one point in his/her life, taken an Uber to an AirBnB.  It makes sense and it's a perfect exemplification of the "gig economy" working in both housing and transportation.  Take a car you don't own to stay in a play you don't own, yet efficiently meet the needs of your travel and lodging.


What about the other side of the equation?  Let's say you're the owner of the property that you list on a short-term rental website?  And let's go a step beyond and say that you make a practice of renting your property such that it generates a quantifiable amount of income each year?  Can you use this income to qualify for a mortgage?


The Basics

Let's first paint rental income in some broad strokes.  We'll come back to some of these later so it's important to understand how the mortgage industry treats rental income in general.  

  1. Rental income almost always needs to be generated by an investment home.  This means the subject cannot be a primary residence or a true second/vacation home.  In cases where the property is a multi-unit (duplex, triplex, 4-unit), it is acceptable if one of the units is a primary residence while the other(s) is rented.
  2. Rental income, for the vast majority of mortgage qualifications, requires a one-year lease agreement in place.  Yes, the lease may have converted to month-to-month after the first year, but lenders are looking for stability and they largely define that as a 1-year lease to start.
  3. Guidelines will vary depending on whether the borrower is purchasing or refinancing, so in the latter case, demonstrating rental income on a property by way of a two-year tax return history can go a long way towards establishing stable and usable income.  
  4. Boarder income (rooms rented within what is usually a single family residence, or SFR) is not generally allowed as qualifying income with a few exceptions.  If you think you may have such a situation, let me know and we'll discuss in detail.


Off We Go!

I realize that some "vacation" rentals are just that.  Stunning locations, resort-like amenities, etc.  But what about the very "workmanlike" accessory unit (aka, "ADU") on your primary home that you've consistently rented out over the last few years?  Sure, you've never had a long-term tenant or lease, but thanks to technology, you've been able to keep the unit rented for a majority of days in the year.  Here, we're going to assume our borrower is looking to refinance and use the income generated by the short-term rental to help with the qualification.  Let's again go to the numbers:

  1. If this property is your primary home AND it's a single-family residence AND the accessory is legally permitted AND you have a two-year rental history per your tax filings, it's likely you can use this income to qualify.  On a purchase, a rental survey would be used to determine the market rents.  On a refinance, the owner's tax returns would show the historical rental income/loss.
  2. If you do not claim rental income on your tax returns, you cannot use it to qualify, even if you have the rental receipts to show you're renting the property.  An exception here might be a bank statement or investor loan that does not require tax returns.
  3. If the home in question happens to already be your vacation residence, you cannot refinance it as a second/vacation home and use rental income from it.  Vacation residences cannot claim rental income per the definition of their occupancy status.


The Devil in the Details

As you can see above, the underwriting attitude surrounding short-term rental income is more favorable than it was in the past.  The trend is good.  But if you're going to make a case for using short-term rental income (AirBnB, VRBO, etc.) from a property you own, your best bet is to have a 2-year history of declaring the income on your tax returns.  It's further helpful to have all of your service provider receipts for the renting of the property.  Last but not least, your property must be legally able to be rented both per the terms of your existing or new financing and by any ordinances in the town where the property is located.  With the above, we are available to help with an understanding of what's possible in terms of your mortgage goals, so get in touch any time.


Bon voyage, 



Robert J. Spinosa
Vice President of Mortgage Lending

Guaranteed Rate
NMLS: 22343 
Cell/Text: 415-367-5959


Marin Office:  324 Sir Francis Drake Blvd., San Anselmo, CA  94960

Berkeley Office:  1400 Shattuck Ave., Suite 1, Berkeley, CA  94709

*The views and opinions expressed on this site about work-related matters are my own, have not been reviewed or approved by Guaranteed Rate and do not necessarily represent the views and opinions of Guaranteed Rate.  In no way do I commit Guaranteed Rate to any position on any matter or issue without the express prior written consent of Guaranteed Rate's Human Resources Department.


Guaranteed Rate. Illinois Residential Mortgage Licensee NMLS License #2611 3940 N. Ravenswood ChicagoIL 60613 - (866) 934-7283


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Debb Janes EcoBroker and Bernie Stea JD
ViewHomes of Clark County - Nature As Neighbors - Camas, WA
REALTORS® in Clark County, WA

It depends?  Anyone with concerns or questions would be wise to call you Rob. This is one that sounds pretty tricky. Thanks for sharing your expertise with us. 

Feb 13, 2020 07:47 AM #1
Lottie Kendall
Compass - San Francisco, CA
Helping make your real estate dreams a reality

Rob, I'm sure you are getting this question more and more these days, what with the ADU trend accelerating here in California, and the Airbnb phenomenon. Nice explanation!

Feb 13, 2020 08:21 AM #2
Joe Pryor
The Virtual Real Estate Team - Oklahoma City, OK
REALTOR® - Oklahoma Investment Properties

We have bought vacation property as a second home and met those requirements and done short term rentals. He did it again and we are about to do it a third time. The key is to not commit fraud by saying it is a second home but never staying there.

Feb 13, 2020 11:14 AM #3
L. Scott Ferguson
Ask4Ferguson - Your House-SOLD Name in Real Estate - West Palm Beach, FL
Sunny Florida Real Estate Professional

Thanks Rob!  Thanks also for the 'Devilish Details'!

Feb 13, 2020 02:01 PM #4
Grant Schneider
Performance Development Strategies - Armonk, NY
Your Coach Helping You Create Successful Outcomes

Good evening Rob Spinosa - it is certainly wise to all of the information first.  I have a vacation home but not interested in renting at presengt

Feb 13, 2020 07:43 PM #7
Jeff Dowler, CRS
eXp Realty of California - Carlsbad, CA
The Southern California Relocation Dude


This is terrific information that I am going to share with several people who I think need to know about this for the future. With the popularity of AirBNB and more and more ADUs this is certainly timely information. Thanks!


Feb 13, 2020 08:46 PM #8
Debra Leisek
Bay Realty,Inc Homer Alaska - Homer, AK

This a really good post with wonderful information. We have sooo many people doing vacation rentals in our area  Its Unbelievable! Thank you!

Feb 14, 2020 12:16 AM #11
Sham Reddy CRS
H E R Realty, Dayton, OH - Dayton, OH

Great informaton on vacation rental when it comes to counting source of income! Rental income, for the vast majority of mortgage qualifications, requires a one-year lease agreement in place.  Yes, the lease may have converted to month-to-month after the first year, but lenders are looking for stability and they largely define that as a 1-year lease to start.

Feb 14, 2020 03:57 AM #12
Kat Palmiotti
406-270-3667,, Broker, Blackstone Realty Group - brokered by eXp Realty - Kalispell, MT
The House Kat

That's a great overview on rental income and how/whether it can be used. 

Have a great day!

Feb 14, 2020 06:11 AM #15
Gary Coles (International Referrals)
Venture Realty International - Las Vegas, NV
Latin America Real Estate

Thank you  Rob Spinosa.    This is great information.  It is amazing how many people are using Airbnb and other services. I am currently managing some of these properties for owners who either can't or don't want to do the day to day management.  I am going to keep a copy of this information for some of my owners.

Feb 17, 2020 06:39 PM #24
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Rob Spinosa

SVP of Mortgage Lending, Marin County
Can I Get a Jumbo Loan with 10% Down?
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