Airbnb Income for DSCR Loans
Airbnb Income for DSCR Loans
DSCR loans are Non-QM products designed exclusively for investment properties. They assess eligibility based on the property’s ability to generate cash flow, making them ideal for all types of rentals, including Short-Term Rentals (STRs). As such it is possible to use AirBnB income for DSCR loans.
General Eligibility and Qualification
STR income is permitted for both purchase and refinance transactions under various DSCR program guidelines.
- Property Type: DSCR loans are intended for income-producing properties designated for business purpose only. The property cannot be owner-occupied.
- Income Source: Qualification is based on the cash flow from the subject property, meaning no personal income or employment verification is required.
- STR Acceptance: DSCR lenders are generally short-term rental friendly. Vendors such as Airbnb, AirDNA, VRBO, and HomeAway are acceptable sources for income verification.
- Compliance: The STR income must be legally permitted and considered common for the area, as confirmed by the appraisal and/or property location.
Documentation and Calculation of STR Income
The verification methods differ based on whether the borrower is purchasing a property or refinancing an existing STR. In all cases, the DSCR calculation compares the verified Gross Rental Income to the Proposed PITIA (Principal, Interest, Taxes, Insurance, HOA).
A. Documentation for Purchase Transactions
For purchases, we rely on projections of the property’s earning potential:
- AirDNA Rentalizer Report: We frequently utilize third-party market data, such as the AirDNA Rentalizer Property Earning Potential report or Revenue Calculator.
– Calculation: Qualifying income is often calculated using a percentage of the estimated revenue. For example, some programs use 80% of the rental income derived from the AirDNA report. The projected annual revenue is typically divided by 12 months to demonstrate sufficient monthly income.
– Report Requirements: The AirDNA report must meet specific criteria, such as a 12-month forecast period, minimum occupancy rate (e.g., >50%), and a minimum number of comparison properties. The report must be dated within 90 days of the Note date.
– Appraisal: When using an AirDNA report for qualification, a standard FNMA Form 1007 may not be required. - Appraisal Form: Alternatively, income may be documented using a supplemental appraisal form completed by the licensed appraiser who performed the original appraisal. The appraiser may use long-term or short-term market rents from the 1007 or 1025 Comparable Rent Schedule survey.
B. Documentation for Refinance Transactions
For properties already operating as STRs (refinances), we focus on historical performance:
- 12-Month History: The calculation is based on the average deposits over a 12-month history, including zero deposit months. Refinances require the actual 12-month STR income history.
- Required Documentation: This history must be supported by documentation from the STR vendor (Airbnb, VRBO, HomeAway, or a third-party management company). The documentation must clearly identify the subject property by address or a unique property ID.
- Calculation: The DSCR is calculated by taking the monthly average gross rent over the 12-month lookback period and applying an expense factor (e.g., multiplying the rent by 80%) before dividing by PITIA.
Specific DSCR Program Overlays and Restrictions
STR DSCR loans often have tighter restrictions than standard DSCR loans to mitigate the risk associated with variable income:
| Requirement/Restriction | Details |
| Minimum DSCR Ratio | STRs often require a higher minimum DSCR than long-term rentals. This minimum can be 1.00x or 1.15x. The River DSCR program requires a minimum DSCR of 1.25x. |
| Maximum LTV | The maximum Combined Loan-to-Value (CLTV) is often capped at 70% or 75%. Some programs cap STR transactions at a maximum of 60% LTV. |
| Borrower Experience | For certain purchase transactions, the borrower may need a minimum of 1 year experience operating a short-term rental in the past 12 months. However, First Time Investors are allowed if the DSCR is >1.0 and the FICO score is >700. |
| Geographic Restrictions | New York City short-term rental qualifying income is not permitted. STRs are also ineligible in the five New York City Boroughs under the Horizon guidelines. |
| Product Exclusion | Some specific Non-QM product guidelines, such as the Edge Investor Classic/Elite, explicitly state that Short Term Rental Income is not permitted on the subject property, and no STR income whatsoever (e.g., AirDNA, short-term 1007, short-term rental statements) is allowed, though they may allow long-term annual rents to qualify. However, other sections of the Edge guidelines do provide criteria for STR purchases and refinances. |
FAQ's
Refinances rely on actual historical income, requiring the most recent 12-month income statement from the online market place (e.g., Airbnb, VRBO, HomeAway) or a third-party management provider.
No. Some specific DSCR product guidelines (e.g., Edge Investor Classic/Elite Refinance, Horizon DSCR No Ratio) explicitly state that Short Term Rental Income is not permitted on the subject property.
Short-Term Rental transactions generally require a higher minimum credit score, often starting at 700 FICO.
Yes, Short-Term Rentals are ineligible in the five (5) New York City Boroughs (Manhattan, Brooklyn, The Bronx, Queens, and Staten Island).
Maximum LTV is restricted for STRs, often capped at 75%. Some specific programs may restrict LTV to as low as 60% or 70%.
The short-term rental statements must clearly identify the subject property by address; a Property ID number or description alone is typically not sufficient.
The income calculation involves taking 80% of the estimated annual revenue from the AirDNA report and dividing that figure by 12 months.
For purchases, lenders primarily use projections derived from the AirDNA Rentalizer (or Revenue Calculator) report.
Due to the variable nature of STR income, a higher minimum DSCR is usually required, such as 1.15 or, in some programs, a minimum of 1.25.
Yes, STR income is permitted for both purchase and refinance transactions under various DSCR program guidelines, as these loans are designed for investment properties and all types of rentals.
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