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Airbnb Loan Options & Challenges

Securing a conventional loan for your Airbnb property can be tricky and require a lot of leg work.

You need to dig up years of banks statements, tax returns, and any other financial information your bank deems relevant for loan approval purposes. The process can be lengthy and frustrating – particularly if you cannot prove a reliable source of income.

However, you do have other lending options if a conventional loan is hard to come by.

A stated income Airbnb lender, for example, requires neither proof of income, nor that the borrower is employed full-time. These lenders can often be an ideal alternative for the self-employed aspiring to become Airbnb property owners.

What is a Stated Income Loan?

Stated income loans are financing that do not require formal proof of income (such as a W-2) for approval. Instead, lenders ask only for the would-be borrower’s “stated income,” meaning that the lender is taking the borrower at their word that they can repay the loan.

 Stated Income Loan Investment History

Until 2010, several lender types – including commercial banks – were legally allowed to provide these products to a wide array of borrowers. As more and more people looked to secure mortgages in the booming real estate market of the early 2000s, these products became commonplace.

The 2008 Financial Crisis

Eventually, these loans became too easy for cash-strapped borrowers to secure, and many began defaulting on their obligations. Commercial banks became over-exposed to defaulting mortgages – practically all at once – and their insurance providers were unable to cover the unanticipated surge in claims.

This sequence of events ultimately led to the 2008 housing market crash, at which point commercial banks stopped providing stated income loans.

The Dodd-Frank Act

In response to the 2008 financial crisis, Congress passed the 2010 Dodd-Frank Act, which requires most borrowers to provide financial documentation that verifies their ability to repay loans. Commercial banks cannot provide mortgages without receiving and documenting this official proof of income.

The Act also restricts the type of borrower that can apply for a stated income loan. Prior to 2010, practically any borrower type could apply (and likely be approved) for the loan. Since Dodd-Frank, however, an investor in any owner-occupant property is prohibited from securing a stated income loan.

Does That Affect How We Can Serve You?

No, it does not.

As a non-bank and stated income loan provider, Vacation Rental Loans does not require W-2s, or any other financial information required by traditional lenders, to verify income.

Instead, we provide stated income Airbnb loans, which use sources other than your income to secure funds.

Who Should Still Consider a Stated Income Airbnb Lender?

It is important to know that the Dodd-Frank Act does not apply to two borrower types common in the Airbnb investment business: the self-employed, and those investors using the property solely as a vacation rental.

This makes stated income Airbnb loans particularly attractive to small business owners, “gig” workers, and other investors with fluctuating incomes who are looking to purchase non-owner-occupied rental properties.

The Three Main Advantages of a Stated Income Airbnb Loan

After doing some research, you will find that there are many reasons to consider a stated income Airbnb lender, but three main advantages are as follows:

1. The Application is Quick and Easy

A conventional loan might not be your best bet if you need financing in a hurry. The application process for conventional loans can take weeks, if not months, to be approved before you can receive capital.

However, because stated income Airbnb loans do not require much paperwork or many financial verifications, the lender does not need much time to review your application. The quicker turnaround time means you get approved faster and receive your funds in a timelier manner.

2. You Can Be Self-Employed

While self-employed workers enjoy many options and flexibilities associated with being their own boss, financing opportunities are typically not one of them.

Fortunately, stated income Airbnb loans are entrepreneur-friendly. As stated previously, conventional loans from commercial banks require borrowers to provide proof of income, which at times can be difficult for the self-employed.

3. No Restrictions on Use

Another reason to work with a stated income Airbnb lender is that traditional lenders – such as commercial banks – want to dictate how you spend the proceeds. They will often look to restrict those uses to specific businesses purposes, and that limited scope can potentially hamper your investment abilities.

When you apply for a stated income Airbnb loan, you get to choose how you spend the money. All the lender will do is calculate the proposed monthly payment based on your requested loan amount, and you then decide if you can afford it. If you accept the loan terms, you can use the funds in any manner you see fit.

You Have Enough to Worry About – Let Us Help

Starting a small business and being self-employed can be stressful. You do not always know who your next client is or where your next paycheck is coming from.

With so many things already on your plate, why tack on the added stress of where to find financing for your next Airbnb investment property?

At Vacation Rental Loans, we are a non-bank and stated income Airbnb lender who understands that more goes into a loan application than just your income. We believe that each potential borrower deserves careful consideration – not to be tossed aside because of last year’s W-2.

We have an experienced team of loan professionals eager to help get the financing you need for your new Airbnb investment.

Contact us today to request a quote.