How to finance an Airbnb rental: A guide for investors

You’ve probably heard of Airbnb. You might have even used one. Airbnb is a platform that enables people to rent out rooms or full properties to travelers, who can book directly through the website. These allow personalized travel experiences and offer accommodations in areas that might not have many hotels or inns. Airbnb is a popular kind of investment property, and many people wonder if they can be financed. The simple answer is yes.

We’ll walk you through what different loans are available for short-term investment properties, challenges you might face, and tips on how to land the loan.

What is an Airbnb loan?

While there is no such thing as a specific “Airbnb loan,” there are a variety of financing opportunities for these short term investment properties.

The type of financing you’ll need will depend on your situation. Maybe you simply want to rent out a trailer or campsite on a piece of land. Maybe you want to buy a vacation cottage for yourself and rent it out during the part of the year you’re not using it. Maybe instead you simply want to rent out a room in your home, which we’ll talk about later in the article. Whatever you’re looking at, you’ll be able to use your rental income to pay down your mortgage or loan.

There are two important considerations when looking to finance an Airbnb:

• Airbnb rentals are generally considered different from long-term residential rental properties as guests often only stay for a few days or weeks.
• Mortgages for investment properties have higher requirements than those for primary residences. Down payments must usually be a minimum of 15%, while you can expect higher interest rates and stricter credit score requirements.

Type of financing available for Airbnb investing

Depending on how you’ll use your Airbnb, you have a variety of financing options. Let’s take a look at some of these options for those planning on an Airbnb as an investment property that won’t be lived in by the owner.

Please note that all requirements listed here are general estimates not specific to any company. One lender might require a minimum credit score of 620, while another lender offering the same loan requires 680.

Conventional mortgage

A conventional mortgage is popular for people who have never taken out a mortgage before and can’t access equity for refinances. They’re backed by private lenders, not by the government. Some of these are fixed-rate, while others are adjustable-rate. Very simply, this means that some have a set interest rate throughout the entire life of the loan, while others have an interest rate that fluctuates with the market.

Most conventional mortgages are also “conforming,” which means they follow guidelines laid out by government-sponsored entities Fannie Mae and Freddie Mac. The most important takeaway there is the loan limit, which in 2025 is $806,500 in most of the United States. If you need more than that, you’d be looking at non-conforming loans such as jumbo loans.

What’s required:

• A minimum credit score of 620
• A maximum debt-to-income (DTI) ratio of 50%
• A down payment of at least 3%
• Private mortgage insurance until you have 20% equity in the home

Who it’s best for:

• Those who don’t have, or don’t want to use, equity in another property
• Those who want to buy a property with an investment partner
• Those with fairly solid finances

Cash-out refinance

A cash-out refinance is a new mortgage that replaces your original one, so it requires already having at least one property. When you get a refinance, you will still have one monthly payment on your home, but the terms will be new. If you get a cash-out refinance, you’re taking out a larger loan and getting the difference between the two as a cash payout, possibly with a lower interest rate. You can use this money for a down payment on a potential Airbnb property.

However, there are tradeoffs to consider. You have a bigger loan out on your home, monthly payments are likely to be higher, and you’ll have to pay closing costs again.

What’s required:

• A minimum credit score of 580, though this will vary by lender
• A maximum DTI ratio of 50%
• Equity in an existing property of a certain percentage

Who it’s best for:

• Those with a lot of equity in one or more other properties
• Those with properties that might have gone up in value since they were purchased
• Those who want to minimize how many different bills they have each month

Home equity loan

A home equity loan is another popular option for someone who has equity in one or more properties. Home equity loans are second mortgages. Unlike a cash-out refinance, you leave your original mortgage alone. You instead borrow a new loan against the equity you built in another property.

While this means a second monthly payment on one property, you’ll likely have lower closing costs than you would on a cash-out refinance.

Rocket Mortgage^® offers a Home Equity Loan.

What’s required:

• A minimum credit score of 620, though it’s higher for most lenders
• A maximum DTI ratio of 45%
• Enough equity to take out a minimum amount, which varies by lender, is often required

Who it’s best for:

• Those with a lot of equity in one or more other properties
• Those with properties that might have gone up in value since they were purchased
• Those who don’t want to refinance their original mortgage due to interest rates

Home equity line of credit (HELOC)

A home equity line of credit, better known as a HELOC, is similar to a home equity loan. You borrow against the equity of your home, but the key difference is that the amount taken out is flexible. You don’t have a loan of a set amount, so you can use as much or as little as you like as long as you stay within the limit.

Rocket Mortgage doesn’t offer HELOCs at this time.

What’s required:

• A minimum credit score in the mid-600s, though it’s higher for most lenders
• A low DTI ratio
• Enough equity to take out a minimum amount, which varies by lender, is often required

Who it’s best for:

• Those who don’t know how much money they might need
• Those with a lot of equity in one or more other properties
• Those with properties that might have gone up in value since they were purchased

Portfolio loan

Portfolio loans, while less common, are ideal for those who are struggling to get conventional or government-sponsored loans. This could be due to a low credit score, high debt-to-income ratio, inconsistent or seasonal income, or poor credit history. Because portfolio loans are backed by the individual lender and never sold on the secondary market, they don’t have to follow the conforming loan requirements that conventional loans follow. This means they can be more flexible.

Bear in mind that if you’re in the position to need a portfolio loan, you might not be in a situation to purchase an investment property.

What’s required:

• Varies widely by lender

Who it’s best for:

• Those who are having difficulty getting conventional loans
• Those seeking a more personalized process and service

Short-term mortgage

A short-term mortgage is exactly what it sounds like. It’s a mortgage that’s paid off in a much shorter time than most mortgages, generally less than 10 years, though sometimes up to 15. Otherwise, it isn’t that different. While the monthly payments will be higher, interest rates are often lower, and borrowers will be able to pay off their loan faster and pay even less in interest.

These mortgages are not offered by many lenders, but Rocket Mortgage offers a YOURgage^®. This unique option allows borrowers to choose a specific loan term between 8 and 29 years

Who it’s best for:

• Those who already have high, reliable income
• Those who are confident their property will earn substantial rental income
• Those who plan on also using the property as their primary residence, which will motivate them to pay the debt even in hardship

Challenges to getting a mortgage for an Airbnb

While getting an Airbnb property for some investment income might sound appealing, there are challenges to owning one. Be realistic when looking at your options and consider the following:

The property isn’t your primary residence

A primary residence is a property that you consider home. You live there the majority of the year and probably have it as your address on most of your identity documents.

Lenders are more willing to offer loans for primary residences because owners are more likely to stay on top of those payments. If someone is facing a financial crisis, they will pay off the mortgage on their home before worrying about payment on their investment property. This is normal behavior, and probably the main reason it’s more difficult to get a loan for most Airbnb properties.

If the buyer doesn’t live on-site, they can face a higher down payment, higher interest rates, and stricter requirements for loan eligibility.

An unreliable travel market

The travel industry can be unreliable and inconsistent. In some years, it might be booming. Other years, due to a variety of factors such as inflation, the weather being poor in the area of your Airbnb, or another region simply being the “hot spot” that year, you might operate at a loss.

Sometimes nationwide or worldwide emergencies arise that severely limit all travel. You could be facing months or even years of minimal rental income.

Some Airbnbs that operate near major hospitals or universities might have more stable success. This is because families of patients and students are more likely to travel regardless of tourism trends at the time.

It can be hard to prove consistent rental income

As we’ve discussed, the travel industry can be unpredictable, meaning short-term rental income is not always stable or consistent. Even if things are going well for a time, it’s hard to predict what they will be like in 10 or 15 years when you’re still paying off the mortgage.

Economic occupancy is the amount of rent actually collected compared to the total potential amount if it were rented out every single night. When you’re looking at a short-term rental that has to be cleaned between each guest, it’s unrealistic to expect you’ll have it rented out every night. Compare this to renting out an apartment on a yearly lease, where you have a reasonably high chance of consistent rental income.

Because of this, you probably don’t want to depend solely on Airbnb rental income, at least not unless you have several properties.

Ongoing maintenance and security costs

Like any home, an Airbnb property will require ongoing maintenance. It’s suggested that 1% – 3% of a house’s value be put aside annually for repairs, but when it comes to an Airbnb, you should probably put aside a lot more.

Unfortunately, guests can be unpredictable. This is true with any rental property, but because you have a high turnover of new people in a short-term rental, it’s even more true with an Airbnb. Some people are messy and prone to being disrespectful to property, while others break things by accident. You might face neighborhood complaints from noisy visitors or deal with someone who fails to lock the property when they leave. Be sure to write a clear and easily accessible list of house rules and stay in contact with your guests. The Airbnb platform also allows you to screen interested visitors so that if you’re uncomfortable after an initial conversation with them, you can turn them down.

While the Airbnb platform might offer to help cover some damage costs from guests, they won’t do much for damage from other causes. Either way, you’ll lose rental income while the property sits empty during repairs.

Zoning laws and local restrictions

Zoning laws regulate what kinds of properties can exist in different areas. You might not want a noisy factory in the middle of a quiet suburb, while some areas might have smaller lots or dangerous roads nearby, which means they are unfit for farm animals. Similarly, some exist to prevent short-term or long-term rentals.

Some particular cities in the United States (and worldwide) have entirely banned short-term rentals like Airbnb due to the housing crisis. Others have restricted them and require permits that can be difficult to get. Be sure they are allowed in the area you’re looking at (and that there is no current legislation being discussed to ban them) before getting too excited about an Airbnb.

If your property is part of a homeowners association (HOA), condo, or co-op association, check their rules before committing to a purchase. Some HOAs do not allow short-term or even long-term rentals at all.

Other ways to finance an Airbnb

If none of the above options seem likely to work out for you, there are some alternatives. Here are a few:

Buy a multiunit property and live on-site

A multiunit or multifamily property is one that two or more families live in. This might be an apartment building or any size or a duplex. Because this means you can live in them as well as rent them out, these are especially ideal for a few reasons:

• You can be right by the property you’re renting out for any issues that might arise, but you won’t have to open your door to travelers.
• Living next door means you don’t have to hire a property manager or make a special trip to clean the unit between guests.
• You’ll be eligible for loans usually reserved for those buying a primary residence. Federal Housing Administration (FHA) loans and Department of Veterans Affairs (VA) loans in particular offer many benefits. Both types of loan allow for flexibility when it comes to down payments and other requirements.

Rent out a room or campsite at your primary residence

While plenty of people are hesitant to let strangers into their home, some travelers choose Airbnb specifically for the opportunity to meet locals. Allowing travelers to stay with you gives you the chance to meet new people, show them around the area, and maybe even learn some new recipes.

Of course, you don’t have to dedicate so much time to them. It’s entirely up to you. Either way, rooms in houses that the owners reside in take up about 16% of all Airbnb rentals worldwide.

In addition to renting out a room, you could rent out some of your property. If you live in an area popular for camping or near a body of water, consider setting up a campsite or even renting a small trailer on the property. Because you’re only renting out a small portion of your home, you might be eligible for standard primary residence loans.

If you go this route, be sure to check local zoning laws and, if you have them, HOA rules.

Tips to secure financing for an Airbnb

Despite the potential difficulties of finding a way to finance an Airbnb, there are some ways you can make it more likely. Consider the following tips:

• Understand the market trends: We’re not asking you to learn about the current housing market, though it can be helpful. Instead, read up on the short-term rental market. Study travel and tourism trends and get an idea of what to expect in that specific area. How many other short-term accommodations are already available there and how much do they go for per night? What are the occupancy rates and seasonal capacity? You want to make a solid case for how your investment property will be able to pay back the loan.
• Don’t go alone: It might be worth it to find an investment property partner. This way, you can pool not only your financial resources, but your different skillsets. Maybe you can take turns managing the property, or maybe you’ll find someone who has experience with short-term rentals.
• Offer a larger down payment: A larger down payment is usually appealing to lenders, especially in a seller’s market or bidding war. Because short-term rentals are notoriously risky investment properties, lenders might be more willing to offer you a loan if you’re able to put down a sizable down payment and reduce the requested loan amount. Keep in mind that you’ll likely have to put at least 15% down anyway.

FAQ

Now that we’ve covered the basics, you might have a few more questions about investing in an Airbnb. Here are a few common ones:

Can I buy an Airbnb property with no money?

There are programs available for low- or moderate-income earners to purchase homes. These come from a range of places, and there might be local home buying assistance programs right in your area. These are often reserved for people trying to purchase a first or primary residence. You can find additional information on the U.S. Department of Housing and Urban Development (HUD)’s website.

However, if you’re in a restrictive financial position, it probably isn’t wise to purchase an investment property. If you currently have no money, you probably don’t have an income stable or high enough to consistently keep up with loan payments. Speak with a financial advisor before making any rash decisions.

Are there no-down-payment mortgages available?

There are two kinds of government-insured mortgages that allow for no down payment. However, they’re difficult to get if you’re looking at an investment property. If your only option is to seek out a loan without a down payment, you might be better off waiting or using the home as your primary residence and simply renting out a room or two.

If that sounds good to you, or you want to look further into your options, read about U.S. Department of Agriculture (USDA) and Department of Veterans Affairs (VA) loans. USDA loans are available in specific parts of the country and reserved for people within certain income limits. Meanwhile, VA loans are for those who have served in the armed forces.

Can I list my house on Airbnb if I have a mortgage?

In most cases, you can list your house even if you have a mortgage on it. Otherwise, you’d find yourself unable to earn any income on it for up to 30 years! Check your loan paperwork to make sure there are no surprises though, as in some rare cases, there might be restrictions. 

The bottom line: Getting financing for an Airbnb is possible

Securing financing for an Airbnb is certainly possible, but you have a lot to consider before you start looking for an investment property. Be sure you have a solid understanding of the rental market, travel trends, local laws on zoning and short-term rentals, and what loans you might be eligible for. Some of these are conventional loans and portfolio loans. If you already have equity in another property, a home equity loan or cash-out refinance could be available. If you plan to live in the property as well as list it on Airbnb, you’ll have even more options with government-backed loans.

Whatever route you go, we’re here to offer advice. Explore financing options with Rocket Mortgage by speaking with a Home Loan Expert today.