Do You Need a Special Mortgage for Airbnb?

It is true that the process of buying a residential home and an Airbnb rental property is a little different. First and foremost, it is always good for local communities when the residents are also homeowners. Therefore, the government backs various loan programs that help people interested in becoming homeowners to qualify for mortgages.

AirBnB mortgage

These programs tend to be a little more forgiving when applicants have lower credit scores, bigger debt-to-income ratios, and even lower incomes. Anyone interested in buying an Airbnb investment property is going to be measured by a different yardstick. The good news is that there isn’t any specific ‘special’ mortgage that has to be used for the purchase of Airbnb properties.

Here is how getting a mortgage will work when it comes to Airbnb rentals. (Find out more here)

Conventional Mortgages Versus Non-Standard Mortgages

The conventional mortgage is among the most popular of all mortgages that applicants go for when purchasing properties. The rules for qualifying for a conventional loan are clear. You find out what the minimum credit score required is, determine what the required down payment is, and work with a loan officer to get all of the particulars. If you are approved, you can bid on applicable properties and wait until your offer is accepted. Non-standard mortgages are used in all sorts of scenarios, including for Airbnb properties.

You may purchase an Airbnb property during the course of refinancing existing real estate loans. Find out more about how other loans besides conventional mortgages can usually be more suitable when buying Airbnb investment properties.

Types of Mortgages That Can be Used to Purchase Airbnb Properties

When banks and financers set to extend mortgages to applicants, they can choose to get into various sectors of the real estate industry. Some mortgage companies work solely with new home builders, while other mortgage companies specialize in refinancing.

If you are buying a property to list on Airbnb so that you can collect short-term rental income, then you are going to need to look at a few different types of mortgages. You can get a hard money loan, or you can get a refinance mortgage where you pay your home mortgage and your Airbnb mortgage in a combined payment. You may want to get a business loan and treat renting with Airbnb as a separate business.

There are several loans that can be used on Airbnb rental properties, so talk to your finance company about everything available.

How Does the Financing Process Differ with Airbnb Rentals?

Consider what you have to do to qualify for a conventional loan on a home that you and your family plan to reside in.

First, you have to sit down with a mortgage officer and talk about your current financial standings. How much money do you have in savings, and how much of that would you be willing to use as a down payment on your new home? What are your total monthly expenses, and how might that change after you qualify for a conventional home loan?

Comparatively, mortgages on Airbnb rentals are solely looked at as investments. Since your Airbnb rental is not going to be your primary residence, more scrutiny is going to be put on your income sources and their stability.

Securing mortgage

Mortgage Sizes and Classes

Conventional loans can be used to buy properties that consist of more than one unit, like apartment buildings, duplexes, condos, and more. The maximum total amount for a conventional loan is $548,250, in 2021. Therefore, if you want to buy a property that costs more than approximately $550K, then you would need to look at jumbo and other non-standard mortgages.

There are also different mortgage classes associated with the size of the loan as well as the type of property being financed. For instance, a mortgage on a commercial property for $660K would not necessarily be considered to be a jumbo loan.

Looking at Alternative Airbnb Finance Options

When conventional and standard financing options aren’t going to work for you, consider the alternative finance methods that can be used to buy Airbnb properties. You may want to jointly apply for alternative financing with a business partner or an investment group, as additional applicants may make qualifying easier. Hard money loans can give you the cash that you need to buy investment properties outright, but the interest rates could be higher and the total length of the loan might be significantly shorter than you imagined.

There is no specific type of loan that you must use in order to buy Airbnb property. You could consider the type of mortgage you qualify for to be special if it is not a conventional loan, or if the qualification process is different than what you have previously gone through.

At the end of the day, you will have a mortgage that you are responsible for paying back at a set schedule, with a maturity date, a set interest rate or variable, and a total outstanding loan balance. Regardless of whether your mortgage is for an Airbnb or a secondary residence, the same basic things will apply.

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