The Quick Read: Plan on at least 25% down on a vacation cabin or condotel rented short-term, because short-term rental purchases top out at 75% loan-to-value (LTV) while a standard long-term rental purchase can reach 80%, and a condotel may face a building-level review that lowers leverage or removes it from a lender’s menu, subject to lender guidelines.
- On an investment-property purchase, a long-term rental typically lands at 75% to 80% LTV. A short-term rental caps at 75%, which means at least 25% down.
- On a short-term rental refinance or cash-out, leverage typically tops out around 70%. Standard long-term rentals reach 75% on a cash-out.
- A cabin is underwritten as a single-family home, so its extra equity comes from the short-term-rental tier and from location and construction questions.
- A condotel adds a second test: the building. A strong borrower can still be turned away because of how the project operates.
- Clearing 1.00 coverage on rent does not mean the property cash flows. It means rent covers the loan payment and nothing else.
No federal rule sets any of this. DSCR loans are business-purpose investor loans, so the equity a cabin or condotel needs is a lender risk choice written into program guidelines. Short-term rental rules can vary by city, county, HOA, and property type, so investors should confirm local rules before relying on projected rental income.
Short-Term Rental Calculator
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Rate source: Freddie Mac 30-yr average via FRED® — Federal Reserve Bank of St. Louis · effective Oct 15, 2026
Prefilled with starting assumptions — enter your nightly rate, occupancy, taxes, and insurance for a more accurate picture.
Short-term rental income is documented with a 12-month history or a market data report. Program parameters update from Lendmire’s centralized guideline source.
As of Oct 15, 2026 · General Freddie Mac market benchmark, not a Lendmire loan offer. Nightly rate, occupancy, taxes, and insurance are editable estimates. Qualifying income for short-term rentals varies by program — some use appraisal market rent, others use documented STR history or projections — and is confirmed in underwriting. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
Why Do Lenders Ask for More Equity on These Properties?
Lenders ask for more equity because the collateral is harder to resell and the income is harder to predict. Both risks shrink the cushion a lender wants between the loan and the property’s value. More down payment rebuilds that cushion.
Three forces drive the gap.
Income volatility. A short-term rental earns well in season and thin outside it. A long-term lease gives a lender twelve months of predictable rent. Nightly bookings do not. So short-term rental files sit one tier lower on leverage.
Collateral liquidity. A cabin in a small resort town has fewer buyers and fewer comparable sales than a house in a suburb. If a lender must sell, it expects a longer, harder sale.
Building structure. This one applies to condotels only. The lender is lending against a unit inside a project it does not control. The project’s rules, manager, and owner mix all affect the unit’s value.
Across the wholesale network of DSCR lenders that Lendmire works with, these three risks show up the same way in nearly every guideline set. The leverage numbers differ by program, but the logic does not.
What Does an Underwriter Mean by Condotel and Cabin?
A condotel is legally a condominium that operates like a hotel, and a cabin is usually just a single-family home in a vacation setting. Underwriters treat them as two different risks. One is a project problem, and the other is a location and construction problem.
Investopedia describes a condotel as a condominium unit run with hotel-style services, and Wikipedia’s condo hotel entry gives the same picture. Picture a front desk, a rental program run by an operator, and owners who use their units part of the year. Lenders classify the building by how it operates, not by the name on the brochure. A building marketed as a resort condo but run like a hotel can still be treated as a condotel.
A cabin has no such classification trouble when it is a conventionally built house. It is a single-family property that happens to sit in the woods or the mountains. The questions are practical:
- Is it a conventional structure, or log construction?
- Does it have standard utilities, including water and septic?
- Are there recent comparable sales nearby?
- Is the location rural or in a thin, declining market?
Log homes fall outside these programs. They are not offered through the network’s DSCR lending, whatever the nightly rate or occupancy looks like. The same goes for manufactured homes and barndominiums. A cabin that is log-built is a no. A cabin built as a conventional frame house with standard utilities goes through as a single-family file.
How Underwriting Treats the File, Step by Step
Underwriting runs in a fixed order: classify the property, review the project if there is one, establish the rental income, run the coverage ratio, then apply the lowest leverage cap that fits. The lowest cap decides the down payment. The caps do not add together.
1. Classify the collateral. A cabin is reviewed as a single-family home, with a check on construction type and utilities. A condotel gets a building-level review in addition to a look at the unit.
2. Review the project (condotels). The lender asks whether the rental program is mandatory or optional, who manages the building, and how many units are investor-owned. These answers decide whether the building is acceptable at all. Only then does leverage come into play.
3. Establish the income. For a short-term rental, the evidence can be a track record of platform bookings, a market-based projection, or the appraiser’s long-term market rent as a fallback. Most programs expect about 12 months of hosting history.
4. Trim the income. Lenders typically discount projected short-term income before using it, because bookings swing.
5. Run the coverage ratio. The debt service coverage ratio (DSCR) is monthly rent used for lender review divided by the full monthly obligation: principal, interest, taxes, insurance, and association dues. Condotel dues are often heavy, which makes the bottom of that fraction larger.
6. Pick the leverage tier. Property type, coverage, credit score, loan size, and location each carry a cap. The lowest one wins.
7. Assemble the file. Expect identity and credit documents, rent evidence, asset statements for reserves, and entity papers if the loan closes in an LLC, subject to program terms.
Reserves are also part of step seven. They vary by lender, leverage, loan size, and transaction type, and a figure around six months of the full monthly obligation is common. Treat that as a typical shape, not a promise.
How the Down Payment Compares by Property Type
The comparison below shows typical leverage ranges across select lenders in the network. Condotels are lender- and program-dependent, so no single figure applies to every file.
| Property | Purchase LTV | Refi / cash-out LTV | Main risk |
|---|---|---|---|
| Long-term rental, house | 75%-80% | Around 75% | Standard |
| Short-term rental, house | Up to 75% | Around 70% | Income swings |
| Cabin (conventional build) | Up to 75% | Around 70% | Location, comps |
| Condotel | At or below STR ceiling | At or below STR ceiling | Building, operator |
| Log home | Not offered | Not offered | Ineligible |
The same table in down-payment terms reads simply. A long-term rental purchase can need 20% down on the strongest files, while a short-term rental needs at least 25%. A condotel starts at that same 25% and may need more once the building is reviewed. Select high-leverage programs reach 85% LTV on standard purchases with roughly a 700+ score, but that tier is not the short-term rental ceiling. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
For purchase and refinance on short-term collateral, the 1.00 coverage floor applies to each separately. 1.00 is where select programs start, not a universal standard. A separate select-lender path takes coverage below 1.00 with leverage and terms adjusted, which in practice means more down, not less.
How Does the Extra Equity Stack Up?
The extra equity does not pile up layer by layer. Every factor has its own maximum LTV, and the file gets the lowest one. Think of it as a set of ceilings of different heights over one room.
Say you buy a conventionally built mountain cabin and plan to rent it nightly. Run through the ceilings:
- Property type: single-family, no problem.
- Short-term use: purchase leverage tops out at 75%. This is the binding ceiling for most strong files.
- Credit: a 640 score is the short-term-rental floor, and stronger credit tends to unlock the top of the range. A weaker score can pull the ceiling below 75%.
- Coverage: a ratio comfortably above 1.00 supports the ceiling. A thin ratio can lower it.
- Location: a rural or thin-comp setting can lower the ceiling again.
If the cabin clears everything, the answer is 75% LTV, so 25% down. If the location or credit pulls any ceiling lower, that lower ceiling takes over. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
Now change the property to a condotel. Add one more ceiling for the building. If the building is acceptable and the unit’s income is documented, the condotel can sit at the short-term ceiling. If the building has a heavy investor mix or hotel-style management, a lender may cut leverage or decline. The investor does not see this in the borrower’s own numbers, which is why it surprises people.
Lendmire’s piece How a Lower Credit Score Raises Your Down Payment on an STR DSCR Loan walks through the credit ceiling in more depth.
Where the General Rule Breaks
The general rule is 25% down for a short-term rental purchase and about 30% equity on a refinance. It breaks in six named places. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
Log-style cabins. Many true vacation cabins are log-built, and log homes are not offered. A buyer who assumed any cabin qualifies finds out at the property-type check.
Remote cabins without utilities or comps. A cabin on a well and septic with no recent comparable sales can draw a lower leverage ceiling or a decline. The lender has no way to support the value.
Mandatory versus voluntary rental pools. In a condotel, a mandatory pool means every unit is rented through one operator. Income is simpler to document, but the building looks more like a hotel. A voluntary pool puts the burden on the individual unit’s rent evidence.
Building-level declines. A condotel can be rejected regardless of the borrower. An investor with strong credit and strong coverage still hits the same wall, because the building fails the lender’s project review. Condotels are lender- and program-dependent for this reason, and some lenders will not take them at all.
A ratio that works on one income and fails on the other. A property can clear 1.00 on short-term income and miss it on long-term rent. Some lenders use the appraiser’s long-term rent as the fallback. If your plan depends on nightly income, test both ratios before choosing a down payment.
First-time hosts. About 12 months of hosting history is the usual expectation. A buyer with none may need a program that relies on a market projection, and may face a lower ceiling because of it.
Second-home loans are not a clean substitute. They limit how much a property can be rented, which defeats a true short-term rental strategy. DSCR loans are designed for non-owner-occupied investment properties, so you cannot live in the unit as your own residence either. Because they are business-purpose investor loans, they are reviewed differently from a standard owner-occupied mortgage.
How the Income Gets Counted
Income evidence comes in three forms. You can show actual booking history, a market-based projection, or the appraiser’s long-term rent. Each gives a different coverage number, and the right one depends on how long you have operated the property.
Booking history is the strongest evidence for a property you already host. A projection helps on a new purchase with no history. The appraiser’s long-term rent is the fallback.
Appraisal forms matter here. Fannie Mae’s appraiser learning center names the Single-Family Comparable Rent Schedule (Form 1007), which estimates long-term market rent, and the Small Residential Income Property Appraisal Report (Form 1025). DSCR files are not governed by agency rules, but these forms are common appraiser tools. A lender relying only on the 1007 can understate true nightly income on a cabin, because that form measures what the unit would rent for on a lease.
Remember what the ratio leaves out. DSCR compares rent to the full monthly obligation only. Repairs, vacancy, cleaning, management fees, utilities, and capital spending sit outside it. A cabin that clears 1.00 can still lose money in a slow season.
DSCR vs. conventional financing
There are two common ways to finance an investment property, and they qualify you differently — here’s how investors weigh them.
Why investors choose it
- Qualifies on the property’s rental income — no personal tax returns, W-2s, or pay stubs needed to document income.
- No personal debt-to-income ceiling to clear, so existing mortgages and obligations don’t cap your borrowing the same way.
- Can be closed in an LLC, keeping the property inside a business entity.
- Built for scaling — not held to the limit on number of financed properties that conventional financing applies.
- Underwriting centers on the deal: generally qualifies when the rent covers the payment, a 1.00x coverage ratio being a common baseline (confirmed in underwriting).
- Designed specifically for investment property, including long-term and, where the program allows, short-term rentals.
Where it’s strong
- Often the lowest ongoing financing cost for a buyer who fully qualifies on personal income — a fit for a first property or a cost-first purchase.
Trade-offs for investors
- Requires full personal income documentation and must fit within a debt-to-income limit — salary, existing debts, and other mortgages all count.
- Typically held in your personal name rather than a business entity.
- Caps how many financed properties you can carry, which can become a ceiling as a portfolio grows.
- Evaluates you as a borrower as much as the property, which usually means more paperwork.
How investors usually choose: a first or single property often optimizes for the lowest financing cost; portfolio builders often optimize for leverage, vesting in an LLC, and scaling past conventional caps. The right answer depends on your goals, the property, and current guidelines — both paths run through select lenders in Lendmire’s wholesale network, with eligibility and terms confirmed in underwriting.
Four Ways to Shrink the Gap
You cannot negotiate the ceiling, but you can often move the file into a better tier. These are the levers, in order of impact.
1. Raise the credit score. Higher scores lift the leverage tier. Moving from the low end toward 700+ can help on files where credit is the binding ceiling.
2. Strengthen the coverage ratio. More rent, or less debt through a larger down payment, lifts the number. A stronger ratio opens better pricing and leverage, but it never lifts the short-term cap itself.
3. Document operating history. Twelve months of bookings is better evidence than a projection, and it can remove a lender overlay.
4. Choose the structure carefully. Extended terms and interest-only periods are available through select lenders in the network. They can improve coverage, though they change the loan’s terms.
A larger down payment lowers the monthly obligation and can lift the ratio, but it does not erase credit floors, reserve rules, or property eligibility. The strongest files clear two tests: enough equity and enough rental coverage.
For a head-to-head look at what 15% versus 25% down means on a resort or cabin deal, see Lendmire’s piece 15% Down vs 25% Down on a DSCR Loan for a Resort or Cabin STR. Every figure here varies by lender and program — guidelines, property type, leverage, and credit profile all apply.
What the Decision Looks Like in Practice
The decision starts with the property, not the down payment. A conventional cabin is a leverage question, and a condotel is an eligibility question first and a leverage question second.
For a cabin, confirm the construction is not log, then confirm utilities and nearby sales. If those pass, plan on 25% down, and treat anything lower as a bonus. For a condotel, ask about the building before you spend on an appraisal. Find out whether the rental program is mandatory, who runs it, and how many units are investor-owned. Final terms depend on lender guidelines, property type, leverage, and the borrower’s complete credit picture.
Then check your numbers on both income bases. If the ratio clears on booking income but not on long-term rent, expect the lender to be more cautious. That may mean more down.
On a refinance or cash-out, plan for lower leverage than on the purchase. Short-term rental collateral typically tops out around 70%, while standard rentals reach about 75% on a cash-out, and about six months of seasoning is the common expectation. That means less equity can be pulled out of a cabin or condotel than out of a long-term rental.
Loan size matters too. Standard programs run up to $3,000,000, and above $2,500,000 the network generally holds to 30-year fixed structures. Smaller balances route through select lenders. Everything above is subject to lender guidelines, credit approval, and property review.
Tax treatment can depend on how the funds are used and how the property is held; investors should keep clear records and speak with a qualified tax professional before relying on any deduction.
Complete program context sits in Lendmire’s complete DSCR loans guide.
Key Terms Defined
Condotel: a condominium unit in a building that operates like a hotel, with a front desk and a rental program.
LTV (loan-to-value): the loan amount as a percentage of the property’s value. Down payment is the part that LTV leaves out.
DSCR (debt service coverage ratio): monthly rent used for lender review divided by the full monthly obligation. A ratio of 1.00 means rent equals the obligation.
PITIA: principal, interest, taxes, insurance, and association dues, the full monthly cost used in the ratio.
Non-warrantable condo: a condo project that fails standard agency project rules, often because of hotel-style management, high investor concentration, or litigation. Most condotels fall into this group.
Rental pool: a program where an operator rents out owners’ units. It is mandatory when every owner must join and voluntary when owners choose.
Seasoning: the waiting period between buying a property and refinancing it.
Frequently Asked Questions
Does a short-term rental always need a bigger down payment than a long-term rental?
On a purchase, usually yes. A short-term rental caps at 75% LTV, so at least 25% down, while a long-term rental can reach 80% on the strongest files. The gap is about five points at the top of each range. Weaker credit or thin coverage can widen it, subject to lender guidelines.
Can I get a DSCR loan on a condotel at all?
It depends on the lender, the program, and the building. Some select lenders in the network take condotels and others do not. The building review is the first hurdle, and the unit’s income comes second. A condotel that passes can sit at or below the short-term ceiling, so plan on at least 25% down.
Are log cabins eligible?
No. Log homes are not offered through the network’s DSCR programs, along with manufactured homes and barndominiums. A cabin built as a conventional single-family home, with standard utilities and nearby comparable sales, is reviewed as a regular short-term rental file.
Will a larger down payment get me past a lower leverage cap?
A larger down payment lowers the monthly obligation and can lift your coverage ratio, but it never removes an eligibility rule. If the building fails review or the property type is not offered, more cash does not fix it. Equity and rental coverage both have to clear.
Does clearing 1.00 mean the cabin will make money?
No. The ratio compares rent to the full monthly loan obligation and nothing else. Repairs, vacancy, management, utilities, and capital spending sit outside it. Treat a passing ratio as a lending test, not a profit forecast.
What to Do Next
If you are buying or refinancing a rental property and want to see how the numbers work, Lendmire can help you compare DSCR loan options based on the property income, credit profile, leverage, and investor goals. As a mortgage broker, Lendmire arranges financing through select lenders in its wholesale network, across 41 markets including Washington, D.C. Not a commitment to lend; every file is underwritten individually.
About Lendmire
Lendmire (NMLS# 2371349) is a mortgage brokerage focused on DSCR investor financing, helping arrange programs through wholesale and investor-lending channels in 41 markets, including Washington, D.C. DSCR loans are evaluated by the lender on property cash flow rather than personal income, subject to lender guidelines, supporting LLC closings and accommodating investors with four or more financed properties. Scotsman Guide Top Mortgage Workplace in both 2025 and 2026.
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References
3. Fannie Mae Learning Center: Appraisers and Property Underwriting
This article is part of Lendmire’s short-term rental loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How to Document Legal STR Use for Your First DSCR Loan · How Much a Higher Insurance Quote Moves Your DSCR · How Much Reserve Cash a First-Time Landlord Needs for a DSCR Loan
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosures. The information presented in this article is general market commentary, not financial, legal, or tax advice. Lendmire is a mortgage brokerage (NMLS# 2371349) — not a direct lender or depository institution — and loan placement is subject to lender underwriting. Nothing in this content represents a commitment to lend. Loan terms, pricing, and program availability vary based on borrower qualifications, property characteristics, and state of subject property, and are subject to change at any time. Lendmire complies with Equal Housing Opportunity requirements. Consumer access: nmlsconsumeraccess.org.