Tag: sharing

refinance Perspectives

Airbnb Rental Income Now Helps You Refinance Your Mortgage

If you’re a homeowner and you’re renting out rooms through AirBnb, congrats! You can now use that AirBnb income to refinance your mortgage. Fannie Mae now allows borrowers to use Airbnb rental income as part of the income qualification to refinance their home loans.

On February 8th, Airbnb announced a partnership with Fannie Mae and three major lending institutions that will allow hosts to formally include the money they generate from rentals when applying to refinance their homes.

Why Are Airbnb, Mortgage Lenders, and Fannie Mae Helping Me Refinance?

The goal of the Airbnb / Fannie Mae / Mortgage Lender partnership is to (1) recognize home-sharing income, and (2)  formalize this growing revenue stream in the eyes of lenders for the many landlords who rent through AirBnb. By using this rental income to help borrowers qualify for a refinance of their existing mortgage, they may be able to lower their monthly mortgage payments in the process.

As part of the arrangement, Fannie Mae will guarantee the mortgages, part of what Airbnb called the government-sponsored enterprises (GSE)’s “work to find new, innovative ways to expand the availability of affordable mortgage credit.”

Fannie Mae Vice President of customer solutions, Jonathan Lawless, said of the partnership that: “Rental income on your own home is something that ten years ago we almost never saw…the fact is that we’re seeing this much more commonly across the country.”

How Do I Put Airbnb on my Refinance Application?

All you have to do is contact AirBnb, and ask them for documentation of the rental income for the past year; AirBnb will provide that. You (the prospective borrower) then put that on your loan application. As it relates to this specific program, borrowers are obliged to work with one of the three lenders listed here: Better Mortgage, Quicken Loans, or Citizens Bank.

No matter which lender you choose, that lender will use your “Proof of Income” statement from Airbnb to underwrite your loan application, during which time they will calculate your average earnings for the last two years.

There are two caveats to be aware of:

  1. You (the prospective borrower / homeowner) must use that home as your primary residence; it cannot be an investor property.
  2. You have to have been receiving rental income from AirBnB for at least one calendar year, in order to use that on this mortgage application.
    • If you just have 12 months of rental income in the past 24, you are still eligible for the program, but the lender will only use 75% of your average earnings to qualify.
    • If you have 24 months of income, the lender will be able to use 100% of the earnings average.

At this point, Fannie Mae is doing this as just a pilot program, so stay tuned to see what the results of this program are and whether it becomes a full-fledged offering across a greater number of mortgage lenders. You can always call us at STEM Lending, and we will give you the latest update.

What’s New About This Partnership?

Prior to this initiative, if you were applying for a refinance you were not allowed to count Airbnb income on your application as income unless you re-categorized the property-type of your home from “primary residence” to “investment property.” Doing that may have subjected you to higher interest rates, which could have lowered or even eliminated any potential savings you would have received from refinancing at a lower interest rate.

As a result of this partnership, Citizens Bank, Better Mortgage, and Quicken Loans, can now allow you to use your Airbnb income without re-categorizing your home as an investment property. Including Airbnb rental income to support your Debt-to-income ratio (DTI) potentially qualifies you for better financing terms and bigger savings on both a rate/term or cash-out refinance. To learn more about how debt-to-income ratios can affect your ability to be approved for a mortgage, check out our prior blog posts on this topic.

Is The Gig Economy Growing Up?

We’ve all read the statistics: Millennials are the largest single segment of homebuyers for the 5th consecutive year, according to the 2018 Home Buyer and Seller Generational Trends study from the National Association of Realtors (NAR). Just over 1/3rd of all home purchases were made by Millennials, who held a market share of 36% over the past year, up from 34% in 2017.

However, mortgage lenders have historically been tougher on income from side businesses and part-time work, where a large percentage of these same Millennials derive their income. The strict underwriting guidelines from lenders are the result of the legal reforms coming out of the financial crisis, when poorly documented or “alt-doc” loans with shoddy income claims on mortgage applications helped fuel the housing bubble, and eventual bust.

This partnership with Airbnb, major mortgage lenders, and an industry giant like Fannie Mae, adds acknowledgement and validity to the “gig economy” whether it be home-sharing or other methods of earning income. If you’re looking to refinance your mortgage and you’ve generated additional cash from your home, you should be able to recognize that income while your refi application is being processed — now you can.

As always, if you have any additional questions on this program and whether it’s right for you, don’t hesitate to call us at 646-798-1800 or email us at support@stemlending.com. We are always available to help you navigate the various mortgage programs and loan options, with the goal of finding the right mortgage for you!