Generally, no. If you are financing a property with a second-home loan, the rent you expect to earn from that home usually cannot be added to your income to help you qualify.
That does not mean you can never rent the property. Fannie Mae allows some rental activity while a home remains classified as a second home, but the rental income generally has to stay out of the qualifying-income calculation.
Second Home Rental Income Basics
| Situation |
Can the Rental Income Help You Qualify? |
| Rent from the second home you are financing |
Generally no. |
| Occasional rental of a qualifying second home |
Rental activity may be allowed, but the income generally cannot be used to qualify. |
| Rent from an investment property you are buying |
Potentially, if the income and property meet Fannie Mae's requirements. |
| Eligible rent from another investment property you already own |
Potentially, subject to documentation and qualifying rules. |
| Expected short-term rental income from the second home you are buying |
Generally cannot be used to qualify for a second-home mortgage. |
The important distinction is between earning rental income and being allowed to use that income for mortgage qualification. Those are two different questions.
Why Can't You Use Rental Income From a Second Home to Qualify?
A second home is financed as a property you intend to use yourself, not primarily as an income-producing investment.
Fannie Mae's rental-income rules generally do not allow income from a second home to be used to qualify the borrower. Its occupancy rules separately allow a property with identified rental income to remain eligible as a second home when that income is not used for qualification and the other second-home requirements are met.
For example, suppose you are buying a $400,000 vacation home and expect to earn $15,000 a year by renting it when you are not there. If the property is being financed as your second home, you generally cannot add that expected $15,000 to your qualifying income to make the mortgage easier to afford.
Your lender instead needs to determine whether you can qualify based on your other eligible income and debts.
Can You Still Rent Out the Second Home?
Potentially. The fact that rent generally cannot help you qualify does not mean a second home can never generate rental income.
Fannie Mae allows a property with identified rental income to remain eligible as a second home when you continue to meet the other requirements. You generally need to occupy the property for some portion of the year, keep control over it and use a one-unit home that is suitable for year-round occupancy.
A rental arrangement also cannot give a management company control over when the property can be occupied.
That means a vacation property you personally use and occasionally rent can be treated differently from a house you buy primarily to operate as a rental business.
The broader rules for renting out a second home focus on how you actually use and control the property rather than whether it earns any rent at all.
What if You Need the Rent to Qualify?
If you cannot qualify for the mortgage without income from the property you are buying, second-home financing may not fit the transaction.
An investment property is treated differently. Fannie Mae allows qualifying rental income from eligible one- to four-unit investment properties when the applicable documentation and underwriting requirements are met.
For a purchase, the lender may use documents such as the appraisal's market-rent schedule and, when applicable, an existing lease to determine the property's gross rental income.
How much of that income can actually help you qualify depends on the transaction and Fannie Mae's rental-income calculations. A property's gross monthly rent should not automatically be treated as an equal amount of qualifying monthly income.
This is one of the most important differences in the second-home versus investment-property decision. If rental income is essential to making the numbers work, the property's actual intended use and mortgage classification need to reflect that.
DSCR loans might be an option if you're looking to use potential rental income to qualify for an investment property purchase.
Can Rental Income From Another Property Help You Qualify?
Potentially. The restriction on income from the second home you are buying does not mean all rental income is excluded from your mortgage application.
If you already own an eligible investment property, qualifying rental income from that separate property may be considered when the documentation and other requirements are met.
The exact calculation depends on factors such as the property, your housing obligations and the documentation available for the rental income.
For example, Fannie Mae can require tax returns, leases, appraisal forms or other records depending on how long you have owned the property and the type of transaction.
Rental losses can matter too. If an investment property's qualifying rent does not cover its applicable housing expense, the resulting loss can increase the monthly obligations used to calculate your debt-to-income ratio.
What if You Plan to Rent Out Your Current Home?
A different situation arises when the new purchase will be your second home but you also own another property that produces rental income.
Eligible rental income from a separate investment property may be considered under the normal rental-income rules. That can affect the way its mortgage payment is treated when your lender calculates your debts and income.
If you are still carrying the mortgage on your primary residence as well, the overall qualification can involve several housing payments and sources of income. The mechanics of buying a second home while you already have another mortgage depend on how those existing obligations and any eligible income are treated together.
Can Short-Term Rental Income Help You Qualify for a Second Home?
Generally, expected Airbnb, or other short-term rental income from the second home you are financing cannot be used to qualify for a Fannie Mae second-home mortgage.
The platform does not change the core rule. Whether the expected rent comes from Airbnb, Vrbo, seasonal tenants or another rental arrangement, it is still rental income from the second home.
Short-term rental activity can also raise a separate question about whether the property actually qualifies as a second home.
If you plan to personally use the property for part of the year and rent it at other times, the arrangement may still fit second-home requirements. If the property is primarily being purchased and operated as a short-term rental, investment-property financing may be more appropriate.
How you plan to use the home matters when determining whether a short-term rental can qualify as a second home in the first place.
How Does Rental Income Work on an Investment Property?
Investment properties follow different qualifying-income rules because producing rental income is consistent with their intended use.
Fannie Mae allows qualifying rental income from eligible one- to four-unit investment properties when the applicable requirements are met.
The lender generally needs documentation supporting the amount of rent. Depending on the transaction, that can include:
- A lease agreement
- A Single-Family Comparable Rent Schedule
- A Small Residential Income Property Appraisal Report
- Federal income tax returns
- Other documentation required for the specific property and loan
The amount of rent counted can also depend on whether you have an established housing payment and a history of managing rental property.
This is another reason second homes and investment properties should not be treated as interchangeable. Investment-property financing may offer more flexibility for qualifying rental income, but it also comes with different down payment, reserve and underwriting requirements.
Does Expected Rental Income Reduce Your Second Home DTI?
Generally, expected rent from the second home does not reduce its mortgage payment when your lender calculates your debt-to-income ratio.
Your proposed second-home housing expense can include principal, interest, taxes, homeowners insurance, mortgage insurance when applicable and association dues.
Because the second home's rental income generally cannot be used to qualify, you usually need enough other eligible income to support that payment along with your existing debts.
This can be particularly important if you still have a mortgage on your primary residence. Even if you expect the second home to pay for itself through seasonal rentals, underwriting may look very different if those rents cannot be counted.
Can You Count Future Rental Income Before You Have a Rental History?
For a second home, the lack of rental history is not the main issue. Rental income from the second home generally cannot be used to qualify in the first place.
For an investment property, rental history can matter. Fannie Mae's rules restrict how qualifying rental income is treated in some situations when a borrower does not have an established history of property management.
That means simply estimating how much you expect to earn from a property is not enough. When rental income is eligible, the lender still has to document and calculate it under the applicable underwriting rules.
Does Rental Income Affect How Much You Need to Put Down?
The property's classification can affect both rental-income treatment and the down payment.
You may be able to buy an eligible one-unit second home with as little as 10% down under Fannie Mae's standard purchase limits. A one-unit investment property generally requires at least 15% down, while two- to four-unit investment properties generally require at least 25% down.
So financing a property as an investment property may allow eligible rental income to be considered, but it can also require more cash upfront.
The down payment requirements for a second home should therefore be considered alongside how you actually intend to use the property rather than independently from its occupancy classification.
What if Your Rental Plans Change After Closing?
Your mortgage application should accurately describe how you intend to use the property when you buy it.
A genuine change in circumstances after closing is different from applying for second-home financing while actually planning from the beginning to use the property solely as an investment.
If you later expand the property's rental use, other considerations can also apply, including homeowners insurance, local short-term rental rules, homeowners association restrictions and federal and state taxes.
The mortgage classification used at purchase should reflect your real plans at the time you obtain the loan.
The Bottom Line
Rental income from the second home you are financing generally cannot be used to help you qualify for its mortgage. You usually need enough other eligible income to support the second-home payment along with your existing debts.
That does not mean a second home can never be rented. Some rental activity can be compatible with second-home financing when you personally use the property, maintain control over it and meet the other occupancy requirements.
If you need income from the property itself to qualify for the mortgage, investment-property financing may better match how you plan to use the home. Eligible rental income can be considered for an investment property under different underwriting rules.
FAQ
Can You Use Rental Income to Qualify for a Second Home?
Generally, no. Fannie Mae generally does not allow rental income from a second home to be used as qualifying income. You typically need to qualify using your other eligible income.
Can You Rent Out a Second Home and Still Have a Second Home Mortgage?
Potentially. Some rental activity can be compatible with second-home financing when you continue to use the property yourself for part of the year, keep control over it and meet the other occupancy requirements. The rental income generally cannot be used to qualify.
Can Airbnb Income Count Toward a Second Home Mortgage?
Generally, no. Expected Airbnb or other short-term rental income from the second home you are financing generally cannot be used to help you qualify for a Fannie Mae second-home mortgage.
Can Rental Income From Another Property Help You Qualify?
Potentially. Eligible rental income from a separate investment property may be used when it meets Fannie Mae's documentation and qualifying requirements. Rental losses can also affect your debt-to-income ratio.
Should You Use an Investment Property Loan if You Need the Rent to Qualify?
If the property will primarily be used as a rental and you need its income to qualify, investment-property financing may better match the transaction. The correct mortgage classification should reflect how you genuinely intend to use the property, and investment properties have different down payment, reserve and rental-income rules.
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