Have lenders changed their tune on STR refis?

Question

Have lenders changed their tune on refis for STR properties? I've combed through the forums and it seems like 1-2 years ago most lenders still needed 2 years income history on tax returns. Other folks have posted that they've actually had success working with lenders on refis for STR without the income history, but depends on the market. Still others have suggested placing long term tenants for a period of time to show cash flow positive rental history.

I'm debating on using HELOC money to purchase an STR using BRRRR strategy but it doesn't make sense to do so if I won't be able to refi.

Sorry that this question gets asked semi-regularly, I just haven’t found any recent updates adapted to today’s markets. Thanks in advance!

I’m debating on using HELOC money to purchase an STR using BRRRR strategy but it doesn’t make sense to do so if I won’t be able to refi.

Sorry that this question gets asked semi-regularly, I just haven’t found any recent updates adapted to today’s markets. Thanks in advance!

John Underwood · Answer

@Mike De Lota

If you qualify for the initial purchase without any rental income from the subject property then you should also qualify for the refinance as far as income requirements go.

Ken Boone · Answer

All the lending rules have changed across the board due to covid.  I just finished a refi on an str and 10 days prior to closing I had to prove I was still employed.  Working on a purchase of another STR right now.  The initial lender kept changing the rules on me right up to the point where we had everything we needed form the builder and was about to schedule a closing.  Changed my % of down payment 3 times.  Every rule they cited was due to covid.  I ended up talking to about 3 more lenders and all of them are telling me the rules of changed.  Each lender is different in regards to this.

Luke Carl · Answer

@Mike De Lota

Only reason it would matter is if you have a DTI issue. Then they would require 2 years tax returns because you don’t have a lease on the property.

Otherwise refinance away. There’s no reason for the bank to even know it’s an “airbnb” -even if you do a second home loan. The “second home rider” as of March 2018 allows Airbnb with a second home loan. Which means as low as 10% down and the best interest rates around. You just can’t put a lease on it. And therein lies your dilemma.

Ken Boone · Answer

@Boris Mordkovich - In the past two months I had a lender say it is their "temporary" covid policy to not allow STR rental income in your DTI ratio.  I am also in a market that is a well known destination vacation rental spot that has only had an uptick in bookings and ADRs since Covid started.  They flat out refused my STR income.  So I think this really depends on the lender.

Boris Mordkovich · Answer

In our recent experience (this year and last), lenders are quite willing to accept Airbnb and short-term rental income as long as it’s reflected on the prior year’s tax return.

Erik Stenbakken · Answer

@Mike De Lota Yeah. You're not imagining this. Things are ALL OVER the board. Even with one lender. I'm finishing financing right now and if I had $5 for every time we had to do a different hoop… I wouldn't need financing! I'd say get the basics from a few banks as to rates and terms, find one you like, then hang on for the ride to follow! Yes. Lenders (and lots of other folks) seem to change the rules without warning then say it like a magic word: "coronavirus." Wise of you to go into this with some caution. Best of luck!

Mike De Lota · Answer

@John Underwood, sounds good. Thanks!

Mike De Lota · Answer

@Luke Carl Thanks for the breakdown, good pointers for me to know. Guess I won’t be quitting my W-2 job anytime soon!

@Ken Boone Appreciate the up to date experience you shared!Thank you both!

Have lenders changed their tune on STR refis?

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