A Breckenridge condo or a Steamboat cabin can earn strong winter and summer income. Qualifying for the loan is another matter if you already own other properties or your tax returns show heavy write-offs. That is where a DSCR loan comes in. Here is how they work, how short-term rental income is counted, what changed at Fannie Mae this fall, and the local rules you need to check before you buy.
Key takeaways
- A DSCR loan qualifies on the property's rent divided by its full payment, not on your personal income.
- Most programs want a ratio of 1.00 or higher, though some accept 0.80 with stronger credit and more down.
- Expect 20% to 25% down, and lenders typically count only 75% to 80% of short-term rental revenue.
- Fannie Mae added a short-term rental rule on September 2, 2026, counting 50% of gross rent.
- Check the town's STR license rules first. Denver allows STRs only in a primary residence, and many mountain zones have caps and waitlists.
How a DSCR loan works
DSCR stands for debt service coverage ratio. One lender's program guide defines it as "the ratio of a property's monthly Gross Rents divided by the PITIA of the Subject property." PITIA is principal, interest, taxes, insurance and association dues.
- DSCR of 1.00: rent exactly covers the payment.
- Above 1.00: the property throws off cash. Some lenders price better above 1.25.
- Below 1.00: some lenders allow down to about 0.80, usually with a higher credit score, more down and no cash-out.
Published programs we reviewed share these features, though terms vary by lender:
- Down payment: usually 20% to 25%. Condos and 2–4 unit properties often need more.
- Credit: minimum scores from about 620 to 700.
- Ownership: many lenders let you close in an LLC or other entity.
- Prepayment penalty: common, usually for three to five years. A typical structure is 5% in year one stepping down to 1% in year five. Loans without a penalty usually carry a higher rate.
Because these loans are for business purposes, they generally fall outside the consumer-lending rules in Regulation Z. Federal rules treat credit to buy or maintain a non-owner-occupied rental as business-purpose credit, according to the CFPB's official interpretation. There is a catch for vacation homes: if you expect to stay in the property more than 14 days in the coming year, the rules treat it as owner-occupied. A DSCR loan is meant for a true investment property.
How short-term rental income is counted
Lenders don't take Airbnb revenue at face value. Common approaches:
- Refinance: 12 months of booking history from Airbnb, VRBO or a property manager, averaged.
- Purchase: an AirDNA estimate, the appraiser's short-term rental estimate or the seller's records. Some lenders only allow this for experienced investors, and some don't allow STR income on purchases at all.
- Haircut: most count 75% to 80% of gross revenue to account for cleaning, platform fees and vacancy.
- Extra conditions: some lenders reduce the maximum loan-to-value by about 5% or require more reserves for STR income, and most require proof that local rules allow short-term rentals.
A worked example
Take a $1,000,000 mountain condo that grosses $90,000 a year in short-term rentals, or $7,500 a month. At an 80% factor, the lender counts $6,000 a month. Assume a 7.75% rate for illustration, plus $1,300 a month for taxes, insurance and HOA dues.
| Down payment | Loan | Monthly PITIA | DSCR |
|---|---|---|---|
| 25% | $750,000 | $6,673 | 0.90 |
| 30% | $700,000 | $6,315 | 0.95 |
| 35% | $650,000 | $5,957 | 1.01 |
That is the honest picture at today's rates. Mountain prices are high relative to rental income, so many resort properties only reach 1.00 with a larger down payment. Run the numbers before you write an offer, not after. Our mortgage calculator can help with the payment side.
New this fall: Fannie Mae's short-term rental rule
On September 2, 2026, Fannie Mae added a short-term rental section to its Selling Guide (B3-3.8-03). For the first time, a conventional loan has a defined way to count STR income:
- It applies to one-unit investment properties that are legally permitted as short-term rentals. Accessory dwelling units are excluded.
- On a purchase, the lender uses a long-term rent estimate on the appraisal, or rental data from three comparable short-term rentals.
- On a refinance, it uses your most recent tax return with Schedule E.
- The lender multiplies monthly gross rent by 50% and subtracts the payment. A positive result offsets the property's own payment. A negative result counts against your debt-to-income ratio.
In the example above, Fannie Mae would count $3,750 a month, well short of the payment, so you would need enough personal income to carry the rest. Conventional investment loans still offer real advantages: as little as 15% down on a one-unit investment property and usually better pricing. But they limit you to 10 financed properties and require personal income documentation. A DSCR loan trades a higher rate and larger down payment for qualifying on the property alone.
Check the local rules first
A DSCR loan only works if you can legally rent the property short-term. Colorado's rules are local and change often. Here is where the major markets stand, based on official and local news sources:
- Denver: short-term rentals are allowed only in your primary residence. A pure investment purchase can't be a Denver STR.
- Summit County (unincorporated): licenses are capped by neighborhood, with waitlists in the Upper Blue, Lower Blue and Snake River basins. The Keystone and Copper resort overlay zones are exempt from the caps, according to the county.
- Breckenridge: licenses are capped by zone. In early 2026, the Downtown Core and Residential zones had waitlists, while the Resort and Tourism zones had open licenses, Summit Daily reported.
- Steamboat Springs: no limit in Zone A, capped subzones in Zone B, and no new STRs in Zone C. Voters approved a 9% STR tax in 2022, per the city. Unincorporated Routt County largely prohibits STRs outside commercial zones.
- Aspen: the city issues lodge-exempt, owner-occupied (120 nights a year) and "classic" permits, with classic permits capped by zone, per the City of Aspen. Pitkin County limits rentals to 120 nights a year, and changes to its rules are under discussion.
- Telluride: no person or entity can hold a financial interest in more than two STR properties, and STRs are taxed at 17.22%, according to the town's STR packet.
- Vail and Eagle County: Vail voters rejected a new 6% STR tax in November 2025, the Colorado Sun reported. Eagle County has no county STR ordinance, but voters raised the lodging tax in unincorporated areas from 2% to 4% for 2026, CBS Colorado reported.
HOA rules can be stricter than the town's. Also confirm whether an existing license transfers to a new owner. For more detail, see our Colorado short-term rental regulations guide and Pitkin County rules update.
DSCR lending is growing
Investor and DSCR loans made up more than 35% of non-QM production in August 2026, according to Optimal Blue, and non-QM loans were more than 11% of all rate locks. Growth has also drawn scrutiny. HousingWire reported that lenders are tightening documentation on investor files, so expect careful review of rental projections, reserves and entity documents.
What this means for you
I have financed investment and vacation properties across Colorado's mountain towns for more than 30 years. The investors who do well start with three questions: Can I legally rent it short-term? What will a lender actually count as income? And does the payment work at today's rate with that income? If you can answer all three before you make an offer, you will know whether DSCR, a conventional investment loan or a second-home loan fits best.
See our DSCR loans page, short-term rental loans and investment property loans, or start a pre-approval with Cedar Home Loans.
Sources
- Fannie Mae Selling Guide — B3-3.8-03, Rental Income from the Subject Property: Short-Term Rental (September 2, 2026)
- Fannie Mae Selling Guide — B3-3.8-02, Rental Income from the Subject Property
- Fannie Mae Selling Guide — B2-2-03, Multiple Financed Properties for the Same Borrower
- CFPB — Official interpretation of 12 CFR 1026.3, Exempt transactions
- eLEND — DSCR program matrix (example of published terms)
- Newfi — Sequoia DSCR matrix, August 3, 2026 (example of published terms)
- Optimal Blue — August 2026 Market Advantage report (September 8, 2026)
- HousingWire — DSCR loan volume growth and underwriting (September 12, 2026)
- City and County of Denver — Short-Term Rentals
- Summit County — Short-term rental waitlist update (January 20, 2026)
- Summit Daily — Here's what happened with Breckenridge's short-term rentals in 2025 (February 19, 2026)
- City of Steamboat Springs — STR rules and regulations
- City of Aspen — Short-term rentals
- Pitkin County — Short-term rentals
- Town of Telluride — STR information packet (June 24, 2025)
- Colorado Sun — Vail voters reject plan to tax short-term rentals (November 17, 2025)
- Eagle County — Short-term rental ordinance status
