Vacation rental financing
Finance a mountain home you'll use and rent
Whether you'll mostly use the home yourself or mostly rent it decides the loan. We'll help you pick between second home, investment property and DSCR financing.
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Three ways to finance a vacation property
Conventional guidelines shown for second home and investment property. DSCR terms vary by lender.
- Best for
- Second homeFrequent personal use, occasional rentalInvestment propertyRental-focused ownershipDSCR loanInvestors qualifying on the property's rent
- Down payment
- Second homeAs little as 10%Investment propertyTypically 15–25%DSCR loanTypically 20–25%, sometimes more
- Pricing
- Second homeOften the best of the threeInvestment propertyTypically higherDSCR loanTypically higher; varies by lender
- Rental income to qualify
- Second homeCan't be usedInvestment propertyA portion of rent, commonly 75%DSCR loanQualifies on the property's rent
- Your use
- Second homePart of the year, with exclusive controlInvestment propertyNo requirementDSCR loanNo requirement
| Feature | Second home | Investment property | DSCR loan |
|---|---|---|---|
| Best for | Frequent personal use, occasional rental | Rental-focused ownership | Investors qualifying on the property's rent |
| Down payment | As little as 10% | Typically 15–25% | Typically 20–25%, sometimes more |
| Pricing | Often the best of the three | Typically higher | Typically higher; varies by lender |
| Rental income to qualify | Can't be used | A portion of rent, commonly 75% | Qualifies on the property's rent |
| Your use | Part of the year, with exclusive control | No requirement | No requirement |
Choosing the right structure
Many Colorado buyers purchase a home in a mountain or resort town, use it for their own vacations, and rent it on platforms like Airbnb or VRBO when they're away.
Mostly personal use: second home. Mostly rental: investment or DSCR.
Rental income varies by season, location and local short-term rental rules, so plan for your carrying costs without assuming the property will cover them.
Second-home occupancy rules
Vacation rental financing questions
You can rent it occasionally. You must personally use it for part of the year and keep exclusive control. It can't be subject to an agreement that gives a management company control over occupancy, and the rental income can't be used to qualify. If you'll mostly rent it and rarely visit, it should be financed as an investment property.
Not with a second-home loan. With a conventional investment-property loan, a portion of the rent (commonly 75%) can usually be counted. With a DSCR loan, the lender qualifies the loan on the property's rent instead of your personal income; how short-term rental income is estimated varies by lender.
It depends on how many days you rent the property and how many you use it yourself. The IRS has specific rules, including a 14-day / 10% personal-use test and a rule that rentals of fewer than 15 days a year generally aren't reported. These are tax rules, not mortgage rules. Talk to a tax professional about your situation.
Find the right loan for your vacation property
Get pre-approved, or call Andrew to talk through how you'll use the home and which program fits.