Short-term rental DSCR loans

How lenders count nightly income and what to check before you buy.

The short version

Depending on the lender, DSCR programs accept short-term rental income from Airbnb and VRBO. Lenders usually want twelve months of platform history, or a third-party market projection for a property you are just buying, and many reduce the income by an expense factor. Others ignore nightly income and use long-term market rent.

Three ways the income gets counted

History. A trailing twelve months of payout reports or bank deposits for a property already operating as a short-term rental.
Projection. A third-party report, of the kind produced by short-term rental data companies, for a property without history.
Long-term rent. The appraiser's market rent for a standard lease, ignoring the nightly income altogether.

Programs differ on which methods they accept, and some haircut the number to account for vacancy and costs. Short-term files commonly limit leverage and often prefer experienced investors, but depending on the lender, programs are open to first-time investors.

What changes in the formula

The formula is the same. The numerator is different. Nightly income swings by season, so lenders average a year or use a projection rather than your best month. Insurance can also change, because a short-term rental needs a policy written for the use, and that policy sits in PITIA.

Worked example. A projection says a cabin earns $4,200 a month on average. A program with a 20% expense factor counts $3,360. If PITIA is $2,800, the ratio is about 1.20. A different program counting only a $2,500 long-term rent would show about 0.89 on the same cabin. Illustration, not market data.

Questions to answer before you buy

Is it legal where you are buying? Cities, counties and associations set permits, caps, taxes and zoning. Some states require a license.
What does the insurance cost? Get a quote for the actual use.
What happens in the off-season? Underwrite a conservative occupancy and test the long-term rent fallback.
Is it a condo? Association rules can ban or limit nightly stays, and depending on the program, lenders review condo rental rules closely.

Local notes on short-term rental rules appear on our state pages. Start with the state index.

Frequently asked questions

Can nightly rental income count?

Where lender guidelines allow it it can. Lenders often look for a year of platform history, or an outside projection when you are buying a property that has none, and many apply an expense factor to the income. Other programs use only long-term market rent. Read the short-term rental page.

Do taxes and insurance really affect approval?

Yes. They are part of the payment in the denominator, so a larger tax bill or a pricey policy shrinks the ratio even when rent holds steady. Get an insurance quote, including flood where relevant, before you make an offer.

How many months of reserves will a lender ask for?

Reserves are the liquid funds still in your accounts after closing, measured in months of PITIA. The range runs from none where lender guidelines allow it to about six months, and goes higher for first-time investors, foreign nationals, large loans and low ratios. Where lender guidelines allow it, cash-out proceeds can count toward the requirement.