DSCR Short Term Rental Airbnb / Vrbo Rentals
A Short-Term Rental (STR) Income Loan Program for investment properties is a non-qualified mortgage (non-QM) designed for real estate investors purchasing or refinancing properties used for short-term rentals, such as Airbnb or Vrbo listings. These loans, often structured as Debt Service Coverage Ratio (DSCR) loans, qualify borrowers based on the property’s rental income potential rather than personal income, making them ideal for self-employed individuals, investors, or those with non-traditional income who want to capitalize on the growing STR market. Below is a comprehensive overview tailored to your request.
Key Features:
Income Verification: Qualification hinges on the property’s projected or historical short-term rental income, evaluated via:
- Debt Service Coverage Ratio (DSCR): Calculated as Gross Rental Income ÷ Total Debt Service (principal, interest, taxes, insurance, HOA fees). A DSCR ≥ 1.0–1.25 is typically required (some lenders allow 0.75 with strong reserves or credit).
- Rental Income Sources: Historical Airbnb/Vrbo income statements, 12–24 months of bank statements showing STR deposits, or market- based projections from appraisal data (e.g., Form 1007 for single- family, AirDNA reports).
- No personal income verification (e.g., tax returns, W-2s) is required for DSCR-based STR loans, though some lenders may consider
personal debt-to-income (DTI) ratios (up to 45–50%) for added scrutiny.
Eligibility:
- Credit Score: Typically 620–680+
- Down Payment: 20–25%
- Loan-to-Value (LTV): Up to 80%
- Reserves: 3–12 months of mortgage payments in liquid assets (e.g., cash, stocks, retirement accounts).
- Property Types: Single-family homes, condos (including non-warrantable), townhomes, duplexes, or multifamily (2–10 units). Some lenders include condotels or rural properties if STR demand is proven.
- Investor Experience: Not always required, but prior STR management experience can improve terms
