Short Term Rental (STR) Mortgage

Key Takeaways

• Mortgage rules vary based on lender restrictions, zoning laws, and tax regulations. Non-compliance can result in penalties, fines, or foreclosure.
• Many lenders restrict home sharing, allow it only for second homes and investment properties, or limit the space and duration for short-term rentals.
• A debt-to-income (DTI) ratio below 43% is often required, though some lenders allow up to 50%.
• Down payments for investment properties are typically 20-25%.
• Lenders typically require borrowers to comply with local regulations for short-term rentals, including licensing, zoning regulations, or limits on the number of rental days.
• Mortgage lenders may require specific insurance coverage for properties used as short-term rentals, including liability coverage to protect against potential claims from guests.

What are STR Mortgage Rules?

STR loans refer to mortgage options that allow property owners to purchase or refinance homes for short-term rental purposes. Mortgage rules for STR define the financial and legal parameters of financing an STR property or using a mortgaged property for STR rentals. These rules depend on lenders, zoning laws, and tax regulations. Non-compliance can lead to fines or even foreclosure.

STR Mortgage Loans

Conventional Loans

Conventional loans — the most common path to financing STR properties — are backed by Fannie Mae or Freddie Mac. You can use a conventional loan to either buy an investment property you don’t live in or buy a house as your primary residence while you host STR guests in the home’s extra space (if it’s allowed).

• Best for: Buyers with strong credit scores looking for long-term financing.
• Key features: High interest rates (0.5-1% higher than primary residence loans) and large down payments (20-25%).
• Eligibility: A credit score of 620 or higher, proof of steady income, six months of cash reserves, and a debt-to-income (DTI) ratio below 43%.
• Loan limit: $806,500- $3,490,300.

These loans often have better interest rates, but their strict requirements put them out of reach for many first-time investors. Plus, most lenders limit how many mortgages you can have, which could stall your portfolio growth plans.

FHA Loans

Federal Housing Administration (FHA) loans are a government-backed short-term rental mortgage option for primary residences. These loans are designed for owner-occupied properties where one unit can be rented.

• Best for: First-time buyers or those with limited funds.
• Key features: Low down payment (as low as 3.5%) and flexible credit requirements.
• Eligibility: Must be a primary residence occupied by the owner for at least one year.
• Loan limit: $524,225-$3,490,300.

FHA loan limits vary by county and property type. For example, the maximum loan amount for a duplex in Los Angeles County is $1,548,975 in 2025. Read our full guide on FHA loans for investment property financing.

STR Loans - No Down Payment

Veteran Affairs (VA) loans are a zero-down mortgage option for active-duty service members, veterans, or eligible surviving spouses. These loans are for primary residences, allowing short-term rentals in some cases, such as buying a multi-unit property to live in one unit while renting out the others.

• Best for: Military service members looking to offset mortgage costs by renting additional units.
• Key features: No down payment and competitive interest rates.
• Eligibility: Must be a primary residence with one unit occupied by the owner.
• Loan limit: $524,225-$3,490,300 (no official cap for veterans with full entitlement).

A down payment may be required if the purchase price is greater than the appraised value or county loan limit. Check out the ultimate guide to VA loans for investment property.

Business Loans for STR property (Small Business Administration)

SBA loans are for STR hosts operating as business entities. These are a type of commercial loan for rental property financing that requires a portion of the property to be owner-occupied.

• Best for: Hosts running STR operations under a formal business structure.
• Key features: Low interest rates and long repayment terms (up to 25 years).
• Eligibility: Requires business registration and properties must be 51% owner-occupied (60% for new construction).
• Loan limit: $5 million.

SBA loan options include the 504 and 7(a) programs, which provide funding for purchasing a property, renovations, or operating expenses.  Learn more about using SBA loans for rental property.

DSCR Loans

Debt Service Coverage Ratio (DSCR) loans focus on the property’s income instead of the borrower’s personal income. Lenders generally look for a DSCR of 1.25 or higher, indicating rental income covers debt obligations by at least 25%.

• Best for: Investors relying on rental income to secure financing.
• Key features: High interest rates (1-2% higher than conventional loans) and large down payments (20-25%).
• Eligibility: A DSCR of 1.25 or higher, credit score above 620, current or projected rental income and expenses.
• Loan limit: $75,000-$5 million.

Lenders often prefer borrowers with short-term rental management experience because it lowers risk and increases the likelihood of loan repayment.

HELOC Loan for STR's

Home Equity Lines of Credit (HELOCs) provide flexible funds based on your property’s equity. HELOCs allow you to use the value built up in your primary residence to finance an STR property.

• Best for: Investors with home equity to fund a down payment for an STR property.
• Key features: Draw funds during a set period (5-15 years) and only pay interest on the amount used.
• Eligibility: Requires at least 15%-20% equity, a credit score of 680+, and cash reserves (usually 18 months).
• Loan limit: 85% of the property’s appraised value (minus the mortgage balance).

HELOCs are a good option if you plan on leveraging the equity in one rental property for a down payment on another (called the ‘waterfall technique’). Learn more about how to get a loan for rental property.