Short term rental financing is the set of loan products available to buy a property you intend to rent in stays of roughly a week or less. Five products cover almost every purchase, and they differ on three axes that matter: how much you put down, what the lender qualifies you on, and what restrictions the loan places on how you may use the property.
The five products
Conventional investment property loan
The default. Typically 20 to 25 percent down, qualification based on your personal income and debt-to-income ratio, and a rate roughly 0.5 to 0.875 points above a primary residence. No occupancy restriction, so you can rent it however local rules allow. The constraint is your DTI: every financed property adds debt to the ratio, which is what limits most buyers to a handful of properties.
Second home loan
Lower down payment, often 10 to 15 percent, and a better rate than an investment loan. The catch is real. Second home financing carries occupancy conditions, generally requiring that you occupy the property for some portion of the year and that it is not subject to a mandatory rental or management arrangement. Renting it out is often permitted, but the terms vary by lender and misrepresenting occupancy is mortgage fraud. Read the note, and see second home vs investment property.
DSCR loan
Debt service coverage ratio loans qualify on the property's income rather than yours. The lender divides projected or actual rental income by the debt payment; most want a ratio of 1.0 to 1.25 or better. Expect 20 to 25 percent down and a rate 1 to 2 points above conventional. The advantage is that it does not touch your personal DTI, which makes it the standard route for anyone scaling past a few properties or with complex self-employment income. See DSCR loans for airbnb.
Portfolio and bank loans
A local or regional bank holding the loan on its own books rather than selling it. Terms are negotiable, underwriting is relationship-driven, and they will consider properties and borrower profiles the agencies will not. In exchange you often get shorter terms, a balloon, or a higher rate. Worth cultivating if you intend to buy repeatedly in one market.
HELOC or cash-out refinance on an existing property
Not a purchase loan, a source of down payment. Pulling equity from a primary residence or an existing rental to fund the down payment on a short term rental is common and effective, and it does mean the new property is carrying debt on two properties. Model the combined payment against the trough season, not the average. See cash-out refinancing an STR.
Side by side
| Product | Down payment | Qualifies on | Rate vs conventional | Use restriction |
|---|---|---|---|---|
| Conventional investment | 20 - 25% | Personal DTI | Baseline | None |
| Second home | 10 - 15% | Personal DTI | Lower | Occupancy conditions |
| DSCR | 20 - 25% | Property income | +1 to 2 pts | None |
| Portfolio / bank | 15 - 30% | Relationship | Varies | Negotiated |
| HELOC (for down payment) | n/a | Existing equity | Often variable | None |
Illustrative ranges for 2026. Actual terms depend on credit profile, reserves, property type, and lender.
Financing shapes the deal, so decide it early
We work with lenders who understand short-term rental income and we set the product before we set your price ceiling.
Apply NowWhat lenders actually check on an STR
- Reserves. Most want six to twelve months of payments liquid after closing, and more for multiple financed properties. This is the requirement that surprises buyers most often.
- Credit. 680 is usually a floor for investment products, 720 and above gets meaningfully better pricing.
- Appraisal with rental analysis. On DSCR loans especially, the appraiser's rent schedule can be based on long-term rent rather than short-term revenue, which can sink a ratio. Ask up front how the lender treats STR income.
- Property condition. A property needing work may not qualify for standard financing at all, which pushes you toward a bridge or renovation product.
The financing mistakes that cost the most
- Shopping properties before getting a real rate quote. A 1.5 point rate difference on a $600,000 loan is roughly $9,000 a year, which is the entire cash flow on many deals.
- Using a second home loan on a property you never intend to occupy. The rate is better for a reason, and the occupancy terms are enforceable.
- Maximizing leverage on a seasonal property. The lowest down payment produces the highest payment, and short term rental revenue is not evenly distributed across the year.
- Assuming your loan officer understands STRs. Many will underwrite projected income as long-term rent, which changes what you qualify for. Ask directly before you apply.
Wider context on how rates interact with returns in interest rates and STR returns.
Keep reading
Frequently asked questions
What kind of loan do you need for a short term rental?
Five products cover most purchases: a conventional investment loan at 20 to 25 percent down, a second home loan at 10 to 15 percent down with occupancy conditions, a DSCR loan that qualifies on property income instead of yours, a portfolio loan from a local bank, or a HELOC on existing equity to fund the down payment.
Can you get a DSCR loan for an airbnb?
Yes, and it is the most common route for buyers scaling past a few properties or with complex self-employment income, because it qualifies on the property's income rather than your personal debt-to-income ratio. Expect 20 to 25 percent down and a rate roughly one to two points above conventional. Confirm how the lender treats short-term rental income, since some underwrite the appraiser's long-term rent schedule instead.
Can I use a second home loan for an airbnb?
Sometimes, but read the note carefully. Second home financing carries occupancy conditions and typically restricts mandatory rental or management arrangements. Renting is often permitted within limits, and terms vary by lender. Representing a pure investment property as a second home to obtain better pricing is mortgage fraud.
How much do you need in reserves to finance a short term rental?
Most lenders want six to twelve months of payments liquid after closing, and more if you already carry several financed properties. Reserves are the requirement first-time buyers most often overlook, and they sit on top of the down payment, closing costs, and furnishing budget.