Anyone having issues refinancing their AirBnB property?

Hello All
So Wells Fargo just called me and told me that Fannie Mae has ruled that any home (wanting to refi a property) that is being used for Airbnb is now considered a commercial property?!? They are unable to approve our refi because it will not be bought! This stumped everyone in their office apparently, as its a new ruling. We Airbnb our home part time while we travel. We also have a guest house on the property that we live in at times. Does anyone have any ideas for me? We were locked in at a great rate and I don’t want to lose it. I have already asked my contact at Wells Fargo to check and see -what if we stop Airbnbing immediately- he has yet to get back to me. Does anyone know of any airbnb friendly lenders? It just seems fishy that had already told us that they were unable to take the Airbnb income into account which was fine, and now they are looking at our tax return and saying that we are a commercial property? Thanks for your time in advance in responding. Nicole

This is the problem with using federally backed loans with properties on Airbnb and other sites like it. The moment any bank gets a hint that you are doing anything commercial on your property they will deny your loan. I have even seen them deny people in the past for having a small eBay business at home.

The only way you can use the income from the Airbnb without telling them is to lie about it. Talk to an accountant and find the best way to declare the income on your taxes without raising suspicion with an underwriter.

We have experienced every possible issue with our properties and are always prepared.

Oh, and if you want fresh eggs and decide to get a couple of chickens, don’t tell anyone about it because if the mortgage company finds out you have livestock, yes, even chickens, they will call you a farm and deny you.

Sorry I should also say that I don’t believe Wells Fargo will move forward with you. Even if you tell them you plan to stop, the damage is done because they already know. I suggest you try again, with a different lender and a new appraisal. Keep going until you find a lender who puts the loan through.

@Billy_Bob_Merkowitz Thank you for all you responses on this thread. Excellent stuff.

1 Like

Do you guys not have buy to let mortgages?

You do have to buy to get mortgages, but you can also refinance a home you already own in order to take cash out for renovations, or to get a better interest rate.

No I mean here in England we have regular home mortgage which you live in yourself. Then we have “buy to let” mortgages which you need to rent a place out. There are “let to buy” mortgages too which takes finance out of the property so you rent it out and you move to a new property to live.

Oh yeah, here they just call them investment property mortgages (conventional mortgages), but certain programs lik FHA require you live in the property. They have different options for difference scenarios, but “commercial” loans are not good as the interest rates are outrageous.

Oh right ok. Yeah it’s interesting how different countries do and call things differently. Can get a bit lost in translation :slight_smile:

Why did you tell WF you Air BNB? If the house is your primary residence, there is no reason they NEED to know this info. I guess if you are using the income to qualify, then that would get sticky. Also, here in CA its not considered ‘commercial’ but ‘investment’ property. I would go to another bank or talk to a mortgage broker. Also, try speaking to the bank that owns your loan now (if that’s not WF) as they will be more likely to help out.

Wow, this is scary!!! My accountant does not let me run my Air as a business with a schedule c but as a rental of my home with deductions. There is not hint of Air on my taxes.

It’s amazing that mortgage companies act the way they do after being a party to gutting the economy and the middle class during the recession!

2 Likes

Well, as a former Mortgage Broker with a very reputable company (we did not do any subprime loans or loan to people without having good LTV’s) - the risk factors in including short term rental income are very real to a lender, Unless the income can be shown to be an ongoing, stable rental income, with a 2 year history, the risks of that not being stable are real. If someone hits a snag in their life, they are more liable to let a rental property go to foreclosure if they do not have a good amount of equity in it… It is those lenders who loaned to people who clearly could not support the expenses or did not have any "skin in the game"
that were so crooked.

Right-- the originators. Mine was originated with a Honolulu firm that is now gone. Sold to Countrywide within a month and then to BofA and the rest is history.

Hello LC…am new here but am experiencing the bombshell of not being able to fetch a home improvement loan as well. The “commercial” aspect of the airbnb rental has erased any possibility. If i cancel the airbnb altogether and contract out long term rentals, would this still be an earmark for future loan applications…?

This depends on whether you live in your Airbnb. The interest rates on primary residences are lower than secondary residences or commercial property. The logic behind this is that people have a much higher incentive to not default on the loan for their primary residence.

Southsage,

If you live in the home that you “rent” out long term then you would need to claim the income as rental income and tell them you have a roommate. You won’t be able to tell them the income is roommate income if you are using Airbnb because they will see fluctuations in payment amounts on your bank statement and will likely see Airbnb paying you the money (unless you use paypal, but they may still want to know where the money comes from if they see it in your checking account.)

If you don’t live in the home and you are using it strictly as an investment house then you will only be able to do it if you are renting it out as a landlord but again. You still likely won’t be able to get a lender to lend if they see Airbnb AT ALL. If you have an FHA loan then its much more strict. If you are doing a conventional loan then its a lot more loose and they may or may not allow Airbnb. It just depends on the company and the underwriter.

The safest thing you can do is have all your Airbnb money deposited to a private account instead of your main checking account. As far as your taxes go, you should explain to your accountant that you need to keep it from looking like you are doing a commercial activity on your property, and that your taxes need to be filed accordingly.

We JUST closed on a major refinance a few days ago to get into a loan that was the best possible loan term at the best rate ever and it was very tedious making sure that all our paperwork was where it needed to be before we applied for the loan.

I will also add that even if you do claim that the money is from a roommate, they will likely ask to see a rental agreement between you and the fake “roommate”.

Hello there…my airbnb is a complete house detached from my main house. This is a primary residence. Texas law states that anything commercial out of your house (primary or otherwise) deems you dead in the water for restructuring a home loan. Will chat with my accountant and see if there is another way. Thanks for the response…Dan

Most states have laws saying its not allowed. Its unfortunate but there are many ways around it. If you want to PM me with questions I will be glad to give you advice on how we did it.

Good morning…! thanks for the reply. The roommate scenario makes sense. It would mean that the yearly statement provided by airbnb would have to be ghost as well. I’m certain my accountant could do this. These guidelines are completely insane. So, all these people that have successful airbnb’s are hogtied by the banks, lending institutions from building a business. The amount of money it will cost to paint, repair, and make ready an additional structure is now an untenable situation for myself and most people.

Its true! Unfortunately, the government sets these guidelines and they aren’t going to change anytime soon. The low interest rates that people get for their mortgages are all regulated. You could apply for a commercial loan, but its much higher interest. You need to make sure your taxes and bank accounts are all correct if you want to do it with a standard mortgage.