Can Second Home be use as Rental Property (AirBNB, VRBO etc)?

[Amit Desai]

Hi,

I need some clarification on how does second home loan and investment/vacation rental loan work, because I have seen that mortgage rate for second home and vacation/investment property are different.

1) What should I choose because my goal is to make it short term rental property to get some passive income?

2) Is there a way to get lower mortgage rate for rental property?

Any inputs/recommendation appreciate it!

Thanks

[Parker Borofsky]

Thank you @Avery Carl

@Amit Desai I am a lender and the company I work for follows Fannie Mae guidelines with no overlays when it comes to this topic.  

Fannie Mae's guidelines verbatim are as follows:

Must be occupied by the borrower for some portion of the year

Must be suitable for year round occupancy

Borrower must have exclusive control over the property

Must not be rental property or a timeshare arrangement (this has the following disclaimer in the guidelines:  If the lender identifies rental income from the property, the loan is eligible for delivery as a second home as long as the income is not used for qualifying purposes, and all other requirements for second homes are met (including the occupancy requirement above).

Cannot be subject to any agreements that give a management firm control over the OCCUPANCY of the property

This means that as long as you intend to occupy the property some portion of the year, you could absolutely rent it while you are not using it.  This is why it can work for short term rentals but not long term rentals.

Hope that helps!