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Erin Spradlin

Airbnb & Lenders: An Unofficial Conversation


From our classes, we know that there is a lot of confusion around the relationship between Airbnb and mortgages/lenders. To help answer some of these questions, I talked to several lenders and got some clarity- but as this remains a gray area, they didn't want to be directly quoted. Below, you'll find what they had to say on it, but we are not lenders/lawyers or tax professionals and advise you to get further information before moving forward.

  1. Is Airbnb money recognized by lenders? This applies to income generated from a rental property (and not just from a room being rented in your house.) Lenders are looking for two years of proven income reported on your taxes on a Schedule E. They care about the number more than they care about the source (assuming it is legal.) If you can provide this, lenders can use the income for both purchase and refinance loans.

  2. Would my mortgage penalize me for using Airbnb? A little context here. Typically the downpayment for a mortgage on a primary residence is 3-5% and the downpayment for a mortgage on an investment property is 15-20%. Additionally (and, importantly), the interest rate is going to be higher on an investment property loan than it is for a primary residence loan. The reason mortgage companies care is because it helps them assess the risk across their portfolio. They only require 3-5% (and a lower interest rate) on a primary residence because that's a less risky investment. If the economy crashes, you are far more likely to pay the bills and fight to keep your primary residence than you are your investment property (hence the 15-20% requirement on an investment and the higher interest rate.) It's considered mortgage fraud if you imply you are going to make a place your primary residence and then turn it into an investment... and people are motivated to do that sometimes because it's easier to secure a loan with 5% than 20%. So, how is this relevant to Airbnb? We've heard whispers and paranoias in class that if your mortgage company finds out you are using Airbnb, they could call your loan (make you pay it in full immediately.) The lenders we talked to felt that this was unlikely if you were doing Airbnb in your primary residence (which is also the only place you are supposed to be doing Airbnb per the Denver law.) It would, however, become an issue if you implied you were buying a property for a primary residence, but did not live there and turned it into an Airbnb investment property. In doing that, you would be guilty of both breaking Denver law and mortgage fraud.

  3. Could my condo lose its FHA status or fail to get it if the building supports Airbnb? Similar to the answer above, your condominium would likely be fine under FHA status if your short-term rentals were limited to primary residence. It would not be fine if the condo building allowed for investors to come in and rent out properties on a full time basis (but again, this would be also illegal under the Denver law.)

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