How to Use Airbnb Income on Your Mortgage Refinance Application

Posted May 7, 2018 5:28 p.m. EDT
Updated May 8, 2018 6:00 p.m. EDT

Airbnb hosts, here’s one more way renting out your spare bedroom can give you extra cash. U.S. hosts are now able to include Airbnb income when refinancing their home mortgage loan with participating lenders Better Mortgage, Citizens Bank and Quicken Loans thanks to an initiative between Airbnb and Fannie Mae. Read on to find out how it works, benefits of the partnership versus other lenders and what you need to do if you’re considering refinancing your mortgage.

How it works

Here’s who’s eligible for the new partnership: U.S. Airbnb hosts who list their primary residence and are interested in refinancing an existing conforming loan on that home. For anyone who has been denied refinancing in the past, this may provide the boost you’ve been needing. Of course, it always pays to compare interest rates and other costs — if you can afford to wait, other lenders may join in with even better offers.

John Moffatt, head of loan origination at Better Mortgage, says borrowers who have at least one year of Airbnb income claimed on their tax return and proof of income from Airbnb qualify. You may also be asked to submit utility bills.“Think of this partnership as a step toward more forward thinking in how people earn income,” he said. “It’s showing some good initiative in how Fannie Mae is helping borrowers by accepting alternative forms of income.”

Applying through Better Mortgage, Citizens Bank or Quicken Loans is similar to any refinance application. Each lender has its own underwriting and approval process, so you’ll need to refer to them for any specific questions. “At Better Mortgage, you can go through the entire application online. After you lock in your interest rate, we will then request your tax return, proof of income and any additional documents during the closing process,” Moffatt said. “I’ve heard anecdotally where customers have come to us with [a] high interest rate and just haven’t been able to refinance. It’s great we’re able to help people potentially save thousands of dollars in the long run.”

The rates through Better Mortgage, Citizens Bank and Quicken Loans are comparable with its competitors. Of course, the actual rate you get depends on a number of factors including your credit history, debt-to-income ratio and loan term.

What this partnership means for other lenders

While the three lenders mentioned above accept Airbnb rental income, that doesn’t necessarily rule out other mortgage companies. While Fannie Mae’s requirements for rental income don’t specifically address short-term rentals, Freddie Mac’s guidelines have been updated to help lenders qualify income from short-term rentals. Borrowers must show a two-year history of rental income on their Schedule E.  Reminder: Fannie Mae and Freddie Mac are government-sponsored enterprises that buy and sell residential mortgages. Better Mortgage, Citizens Bank and Quicken Loans have their own agreement with Fannie Mae so they accept a shorter history of rental income.

Cassidy Cain, a mortgage loan officer with US Mortgage, says the partnership with Airbnb could be beneficial to hosts. “The truth is that every lender out there is going to follow the guidelines presented to them by places like Fannie Mae and Freddie Mac,” she said. “However, some may be overly cautious about accepting [Airbnb rental income].”

In other words, other lenders could accept Airbnb income but may be cautious as to how much weight they give it when considering someone for a refinance. These companies may also require two years’ worth of rental income history as required by Freddie Mac, so that could put new hosts at a disadvantage.

Cain says Airbnb income may make a dent in your debt-to-income ratio. “If there’s enough income to significantly reduce your debt-to-income ratio, then you could have a shot at refinancing,” she said. “You’ll also need to make sure you meet all other requirements, such as your creditworthiness.”

Bottom line

This new partnership may work to your advantage if Airbnb income is the factor that puts you over the refinancing finish line, assuming you’re considered creditworthy and can fulfill other lender requirements.

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