Short-term rentals like Airbnb aren’t just popular, they’ve become one of the most profitable strategies in real estate investing. By 2026, the short-term rental market is expected to reach a valuation of $8.9 billion. But if you have tried to finance one, you know the struggle. Traditional lenders want W-2s, long-term leases, and stable 9-5 income; none of which reflect how short-term rentals actually generate cash flow.
Instead of focusing on your personal income, DSCR loans look at how the property performs. At American heritage Lending, we’ve built our DSCR programs with short-term rental investors in mind – flexible, fast, and built for how Airbnb income works. In this article, we’ll break down how these loans work, what you’ll need to qualify, how to stay compliant with local STR rules, and why getting financing that fits the way you invest can help you scale with confidence.
Why More Airbnb Investors Are Going DSCR
Let’s be real: short-term rentals don’t always play by traditional rules. They have seasonality, inconsistent monthly revenue, and by definition, zero long-term lease agreements. This makes them tough to finance through the usual channels, but DSCR loans flip the script.
Instead of evaluating you, they evaluate the property. If the income supports the debt, you’re in business. That means no tax returns, no employment verification, and no explaining why your rental income dips every February.
It’s a financing tool that works with the way Airbnb investors operate – not against it.
The Upsides (and Downsides) of Using DSCR for Airbnb
The Good Stuff
DSCR loans aren’t just a way to get around traditional lending, they’re built for the way short-term rental investors really operate. Instead of relying on your personal income or employment status, these loans focus on the income your property brings in, which is exactly what matters in the STR space.
Here’s why they work so well for Airbnb investors:
- No income docs or job verification. Skip the paperwork parade – you qualify based on property performance, not personal paystubs.
- Your Airbnb income counts. Whether you’ve got a year of actual bookings or need to lean on projections, this program can help structure the deal.
- You can move fast. In competitive markets, being able to close cleanly and quickly makes all the difference.
- Plenty of loan flexibility. Choose from interest-only options or 30-year fixed terms.
- LLC friendly structure. Buy and hold in your business name, with no unnecessary complications.
DSCR loans remove the friction that often slows down STR investors – and when done right, they become the financing tool that helps you scale with confidence.
The Trade-Offs
Like any great tool, DSCR loans come with a few fine print items that every investor should be aware of. They’re designed for flexibility but that doesn’t mean they’re a free-for-all. Here’s what you want to keep in mind:
- Rates are higher than your average conventional loan. DSCR loans are asset-based, not full-doc, and lenders price for that added risk.
- Down payments are steeper. Most deals require 20-30% down, especially for Airbnb properties
- You’ll need a solid FICO score. A 700+ credit score is required for STR purchases at 75% LTV
- Cash reserves matter. Expect to show 12 months of PITIA in the bank – that’s part of how lenders protect against the ups and downs of STR income.
- First-timers need not apply. These STR loans are built for experienced investors, unlike a standard DSCR loan with a long term lease. You’ll need to show ownership of a rental property in the past 3 years.
DSCR loans can be incredibly powerful – but they’re structured with intention. If you’re prepared and know the rules, they can help you scale smarter and move faster.
How DSCR Loans Actually Work for Airbnb Properties
Breaking Down the DSCR Calculation
At its core, DSCR (Debt Service Coverage Ratio) is a simple formula – but it tells lenders a lot about how well your property performs.
Here’s the math:
DSCR = Property Income ÷ PITIA
(PITIA = Principal, Interest, Taxes, Insurance, and Association dues)
Let’s say your Airbnb brings in $4,000 a month, and your PITIA is $3,500. Your DSCR would be 1.14, which means the property generates 14% more than it costs to hold it.
The Rules You’ll Need to Watch Out For
Short-term rentals can be incredibly profitable; but only if your property checks all the right boxes. Here are a few rules investors need to be aware of before diving into DSCR financing for Airbnb properties.
Local Regulations
Just because a property looks like a great short-term rental doesn’t mean it’s legally allowed to be one. Cities and counties often have their own rules, permits, business licenses, zoning restrictions – and if your property doesn’t meet them, lenders won’t be able to move forward, it’s among the first things they look at, so make sure it’s one of the first things you check.
HOA Rules
Even if the city gives you the green light, a homeowner’s association can still throw a wrench in your plans. Some HOAs ban short-term rentals altogether, while others limit how often or how long you can rent. Always double-check the HOA documents before you commit and when possible, get it in writing.
Insurance Requirements
Regular homeowners or landlord insurance usually won’t cut it when you’re financing a short-term rental. That is why AHL requires STR-specific coverage for all Airbnb properties we finance. You’ll need to show liability coverage of at least $100,000, along with rent loss coverage equal to six months of qualifying rental income. These aren’t just boxes to check- they’re protections that are designed to keep your investment (and your income) secure if something goes sideways.
AHL’s DSCR Loan Program: Built with Airbnb Investors in Mind
At American Heritage Lending, we’ve designed our DSCR loan programs with short-term rental investors in mind. We know you’re not showing up with W-2s and a long-term lease agreement in hand. You’re bringing a business model built around nightly bookings, seasonal demand, and long-term cash-flow potential. That’s why we’ve structured our programs to move at your speed and match the way you operate.
Program Highlights
Here’s what makes AHL’s DSCR loan offerings a strong fit for short-term rental investors:
- Up to 75% LTV on purchases, and 70% on refinances
- Loan amount up to $1,500,000
- Choose between 30-Year fixed or 40-year interest-only terms
- No W-2s, no tax returns, and no personal DTI required
- Qualify using actual or projected Airbnb income
Qualification Snapshot
Because short-term rentals bring unique challenges, our STR focused DSCR loans come with clear guidelines.
Here’s what you need to know before applying:
- Property type: Only single-family residences (SFRs) and condos are eligible
- STR use must be legal under local zoning regulations
- Minimum FICO: 700+ when qualifying with STR income
- Minimum DSCR ratio: 1.00
- STR income must come from Airbnb, VRBO, or similar verifiable 3rd party platforms
- For purchases: Borrower must show 12 months of STR ownership and operation experience in a similar market
- For refinances: Property must have 12 months of actual booking history
- Must show 12 months of PITIA reserves
- Mortgage history: No 30-day late payments in the last 12 months
Income Documentation Requirements
- For Refinances: Must show 12 months of Airbnb/VRBO (or similar) deposit history
- For Purchases: If there is no income history, 75% of the projected gross short-term rental income supported by an appraisal form 1007 or property manager report.
Wrap up – Financing That Actually Fits the Way You invest
If you’re building a short-term rental business, you already know the traditional lending world wasn’t built for you. And honestly? That’s fine – because you’ve got better options.
DSCR loans give you the freedom to scale based on your property’s performance, not your pay stubs. And when it comes to lenders that understand the Airbnb model, that’s where American Heritage Lending comes in.
We’ve structured our DSCR loan programs with Airbnb investors in mind – clear guidelines, fast closings, and a team that understands the ins and outs of short-term rental financing.
If you’ve got a property in mind or just want to know what’s possible, let’s have that conversation.