09
Apr
By First Rate Financial Group
Mortgage Tips

The Airbnb Factor and How Renting Out a Room Can Help You Qualify for a Mortgage

With rising home prices and strict lending requirements, many aspiring homeowners are looking for creative ways to strengthen their mortgage applications. One potential game-changer? Renting out a room on Airbnb or another short-term rental platform. This additional income stream could help you qualify for a mortgage and make homeownership more affordable.

How Lenders View Rental Income

Lenders primarily assess your mortgage application based on your income, credit score, debt-to-income (DTI) ratio, and financial stability. While traditional employment income is the gold standard, many lenders are now recognizing rental income as a legitimate source of earnings. However, how they factor in Airbnb income varies based on the lender, loan type, and your rental history.

For lenders to consider Airbnb income in your application, you typically need to meet certain requirements:

  • Documented Rental History: Most lenders require at least one to two years of consistent short-term rental income, verified through tax returns or bank statements.
  • Stable Occupancy Rates: If your Airbnb rental is sporadic, lenders may discount the income or exclude it altogether.
  • Legal and Zoning Compliance: Your property must comply with local short-term rental regulations to ensure the income is legitimate and sustainable.

Boosting Your Mortgage Approval Odds with Airbnb Income

If you are considering using Airbnb income to help secure a mortgage, here are a few key strategies:

  • Keep Detailed Records: Lenders will want proof of rental income, so maintaining clean records, including Airbnb earnings statements and tax filings, is crucial.
  • Consider a Debt-to-Income Boost: If your primary job income isn’t quite enough to meet lender requirements, rental income can help lower your DTI ratio by increasing your overall earnings.
  • Show Rental Stability: If possible, provide proof of consistent bookings and positive guest reviews. Some lenders may be more flexible if you can demonstrate that your property has a steady demand.
  • Opt for a Lender-Friendly Loan Program: Some loan programs, such as those offered by Fannie Mae and Freddie Mac, have provisions that allow rental income to be considered. Consulting with a mortgage professional can help you identify the best options.

Things to Watch Out For

While Airbnb income can be a powerful tool in mortgage approval, there are risks and challenges to consider:

  • Lender Restrictions: Not all mortgage lenders accept short-term rental income, so it’s essential to find one that does.
  • Market Volatility: Short-term rental demand can fluctuate due to seasonal changes, economic downturns, or local regulations.
  • Property Insurance and Liability: Some lenders require specific homeowner’s insurance policies that cover short-term rentals, which may be more expensive.

Renting out a room on Airbnb can be a great way to boost your income and increase your mortgage eligibility. However, it’s important to have a well-documented and consistent rental history to convince lenders of its reliability. If you’re considering this route, working with a knowledgeable mortgage professional can help you navigate lender requirements and maximize your chances of approval.

08
Apr
By First Rate Financial Group
Mortgage Tips

How Your Netflix Subscription Might Affect Your Mortgage Approval

When applying for a mortgage, you expect lenders to scrutinize your income, credit score, and debt-to-income ratio. But did you know that your Netflix subscription—or any other recurring expense—could play a role in your approval?

While a $15-per-month streaming service may seem insignificant, lenders are increasingly looking at all aspects of your financial behavior, including discretionary spending. Here’s how something as small as your entertainment subscriptions could influence your mortgage approval.

Open Banking and Subscription Spending
The rise of open banking has allowed lenders to gain deeper insights into your financial habits. Instead of just looking at credit reports and pay stubs, some lenders now use AI-driven tools to analyze bank transactions. That means your Netflix, Hulu, and Amazon Prime subscriptions, along with gym memberships, meal delivery services, and other recurring expenses, may be factored into their risk assessment.

Lenders want to determine how much disposable income you have after fixed expenses. If your bank statements reveal excessive discretionary spending, they might question whether you can comfortably afford your mortgage payments.

Debt-to-Income Ratio and Lifestyle Spending
Your debt-to-income (DTI) ratio is one of the most critical factors in mortgage approval. It’s calculated by dividing your total monthly debt payments by your gross monthly income. While streaming subscriptions aren’t technically considered “debt,” they are recurring financial obligations that impact how much cash you have left at the end of each month.

If your DTI is already near the threshold lenders consider acceptable—typically under 43% for most conventional loans—additional expenses, even small ones, could make a difference. Lenders may view excessive subscriptions or high entertainment spending as a sign that you are stretching your budget too thin.

How to Improve Your Mortgage Readiness
If you’re planning to apply for a mortgage soon, consider tightening up your spending habits:

  • Audit Your Subscriptions: Take a close look at all your recurring charges. Cancel unused or unnecessary services to reduce your financial obligations.
  • Minimize Discretionary Spending: In the months leading up to your mortgage application, try to keep entertainment and luxury expenses in check. A conservative approach to spending could improve your mortgage eligibility.
  • Show Consistent Savings: Lenders love to see a healthy savings account. Reducing subscriptions and unnecessary expenses can help you save more, demonstrating financial stability.
  • Keep Bank Statements Clean: Since lenders often request two to three months of bank statements, avoid any unusual spending patterns that could raise red flags.

While a single Netflix subscription is unlikely to make or break your mortgage approval, your overall spending habits do matter. The rise of open banking means lenders can see more of your financial life than ever before. Taking proactive steps to manage your subscriptions and discretionary spending can strengthen your mortgage application and improve your chances of approval.

07
Apr
By First Rate Financial Group
Financial Reports

What’s Ahead For Mortgage Rates This Week – April 7th, 2025

The previous week has seen tremendous impacts with the Trump administration’s recently revealed tariff policies, sparking widespread concern about their broad economic effects. These concerns have already led to rapid contractions in multiple markets.

Jerome Powell, Chairman of the Federal Reserve, has stated he is very uncertain about any moves made by the Federal Reserve and wants to wait for additional information before making decisions.

Uncertainty is at an all-time high, without much relief—even in light of positive data from previous months. Without any clear direction, there is growing speculation that inflation will only increase from here. Meanwhile, employment data has already shown a rapid increase in unemployment forecasts.

U.S. Employment Report

The U.S. added a bigger-than-expected 228,000 jobs in March. Good news to be sure, but that was before President Trump unveiled norm-shattering tariffs on the rest of the world, the repercussions of which are yet to be felt on the labor market. Economists polled by the Wall Street Journal had forecast an increase of 140,000 new jobs in March vs a revised 117,000 gain in February. The unemployment rate, meanwhile, moved up to 4.2% from 4.1%, matching the highest rate in five months.

ISM Manufacturing

According to the Institute for Supply Management (ISM), tariffs are driving up business costs and dampening economic activity. U.S. manufacturers appear to have slipped back into a slump, facing higher input prices and weaker demand due to President Donald Trump’s new metal tariffs and pending duties on other imported goods. ISM’s manufacturing index fell to 49% in March, down from 50.3% the previous month—any reading below 50% indicates a contraction in the sector.

Primary Mortgage Market Survey Index

• 15-Yr FRM rates saw a decrease of -0.07% with the current rate at 5.82%
• 30-Yr FRM rates saw a decrease of -0.01% with the current rate at 6.64%

MND Rate Index

• 30-Yr FHA rates saw a decrease of -0.15% for this week. Current rates at 6.03%
• 30-Yr VA rates saw a decrease of -0.15% for this week. Current rates at 6.05%

Jobless Claims

Initial Claims were reported to be 219,000 compared to the expected claims of 228,000. The prior week landed at 225,000.

What’s Ahead

Following reports that the tariff news has disrupted market expectations, we should anticipate that both the CPI and PPI forecasts will come in higher than expected.