Short term rentals affect on getting a new primary residence

[Scott Stahr]

My wife are I are looking into purchasing our first short term rental to use as a vacation home and rent out when we're not there.  We are also looking to move into a new primary residence sometime in the near future and are worried that without a long term lease we may not be able to get the home we desire.  How do banks view short term rentals in regards to a new primary residence mortgage?

[Parker Borofsky]

Hi Scott, Fannie Mae guidelines will allow you to use rental income reported on schedule E of your tax returns with the exception of rental income from your primary home, unless you have a 2 unit property or an accessory unit.  If you have a long term rental with a lease, you don’t have to wait until you have a tax return and 75% of the lease can be used as effective rental income.  If you have a short term rental, you need at least one tax return reflecting the income on schedule E for at least some portion of the previous year.  Some banks may be picky and require a lease, but that is not a Conventional loan requirement.