More and more travelers are using services like VRBO instead of hotel rooms when traveling in the United States and abroad, and more and more investors are turning to vacation homes to put some passive income in their pockets. Now, a new loan will make the rental income from these properties easier to use for mortgage qualifications when they go to refinance.
The new program, from Quicken Loans, uses “rental income earned through VRBO to be used to qualify for a mortgage refinance,” the lender said in a news release. “This program uses confirmed and documented rental income so homeowners can more accurately illustrate their full income stream. Mortgages for primary residences, vacation homes and investment properties are all eligible through this innovative new program.”
Typically, investment property income can help a borrower’s debt-to-income ratio, but being able to show income from short-term rentals is a sign of the times. "Vrbo helps homeowners use one of their biggest assets as a source of income. Now Quicken Loans can accurately review that income and consider it when calculating the debt-to-income ratio – a major data point considers when qualifying for a mortgage," Jay Farner, CEO of Quicken Loans, said in a release. "As our economy continues to evolve, it's important that our lending calculations continue to evolve along with them."
This evolution makes sense when you consider how closely tied the income generated by these short-term rentals is to ongoing living expenses. “Rental income and mortgage payments are often intertwined,” said Inman News. “A June 2018 market report from Vrbo found that more than 50 percent of short-term rental owners utilizing the platform use income generated from their property to cover at least 75 percent of their mortgage payment.”
The rental income can come from a primary residence or a second home, and primary residences, vacation homes, and investment properties can all be refinanced under the program.
The Vrbo partnership with Quicken comes on the heels of competitor Airbnb’s announcement last year that it’s working with both Quicken and Fannie Mae to “allow anyone who has rented out property on Airbnb for a year or longer to count some or all of that money as income” when applying for a refinance, said MarketWatch.