Explore top financing options for Orlando vacation homes and short term rental investment properties. Learn about vacation home loans, DSCR loans, jumbo loans, and more. Connect with the Baldor Group for expert guidance today!
Vacation Home Loans: The Foundation of STR Financing
Orlando’s thriving vacation rental market is built on a strong foundation of flexible financing options. Vacation home loans, often called second home loans, are a popular starting point for buyers seeking a blend of personal use and rental income.
Key Features of Vacation Home Loans:
The property must be used personally for a portion of the year.
Typically, the vacation home should be a reasonable distance from your primary residence.
Interest rates are competitive and often similar to those for primary residences.
Down payments are generally lower than those for investment property loans, usually around 10-20%.
Borrowers need good credit and verifiable income, similar to primary home loan requirements.
Some lenders may restrict how often you can rent out the property, so clarify your intentions up front.
Strategic Considerations:
Understand the lender’s rental restrictions before committing.
Prepare documentation of your credit, income, and assets for a smooth approval process.
If maximizing rental income is your goal, ensure your loan terms allow for the level of short-term rental activity you plan.
Conventional Mortgages for Short-Term Rental Investments
Conventional mortgages are a staple for investors looking to finance Orlando vacation homes and Airbnb properties. These loans are not backed by the government and are available through banks, credit unions, and mortgage lenders.
Key Features of Conventional Mortgages:
Interest rates are typically lower than other options, especially for borrowers with strong credit.
Down payments usually range from 20-30%.
Terms are flexible, with options from 10 to 30 years.
A strong credit score and stable income are required for approval.
Private mortgage insurance (PMI) may be required if the down payment is less than 20%, but can be removed once sufficient equity is built.
What Makes Conventional Mortgages Attractive:
These loans offer flexibility in property types and are widely available.
They are ideal for buyers with solid financial profiles who want predictable payments and long-term ownership.
Slightly stricter underwriting applies for investment properties compared to primary residences, so be prepared for additional documentation.
DSCR Loans: Tailored for Short-Term Rental Properties
Debt Service Coverage Ratio (DSCR) loans are designed specifically for investment properties, including short-term rentals and Airbnbs. These loans focus on the property’s ability to generate income, rather than the borrower’s personal income.
Advantages of DSCR Loans:
Approval is based on the property’s rental income potential, not your W-2s or tax returns.
Ideal for investors with variable or non-traditional income streams.
Suitable for single-family homes, multi-unit properties, and mixed-use buildings.
Down payments are typically 25-30%.
Interest rates are slightly higher than conventional mortgages, reflecting the investment focus.
Lenders assess the property’s rental income using market data and appraisals.
DSCR loans often take longer to close (usually 45-60 days) due to the need for detailed rental income analysis.
Investor Tips for DSCR Loans:
Work with a Realtor who understands the short-term rental market and can provide accurate rental projections.
Gather supporting data from platforms like AirDNA to strengthen your loan application.
Plan for a longer closing timeline and communicate closely with your lender.
Jumbo Loans for High-Value STR Investments
Jumbo loans are essential for financing luxury vacation homes and high-value properties that exceed the conforming loan limits set by Fannie Mae and Freddie Mac.
Characteristics of Jumbo Loans:
Designed for properties above the conforming loan limit (over $726,200 in Florida as of 2024).
Require excellent credit history and a high credit score (typically 700+).
Down payments are generally higher, often 20-30%.
Lenders may require significant cash reserves, sometimes enough to cover 6-12 months of mortgage payments.
Interest rates are competitive but can vary depending on the lender and market conditions.
Documentation is extensive, often including tax returns, W-2s, bank statements, and sometimes a second appraisal.
Why Choose a Jumbo Loan:
Perfect for buyers targeting Orlando’s luxury vacation home market or multi-unit STRs in premium locations.
Be prepared for a thorough underwriting process and ensure you have substantial liquidity.
Portfolio Loans: Flexible Solutions for Unique Properties
Portfolio loans are held by the lender rather than being sold on the secondary market, offering greater flexibility in underwriting and loan terms.
Benefits of Portfolio Loans:
More lenient qualification standards for both borrowers and properties.
Customizable terms and rates to fit unique investment needs.
Can finance multiple properties under a single loan, making them ideal for investors with several rentals.
Suitable for properties that might not qualify for traditional financing.
Interest rates can be higher than conventional loans, reflecting the added flexibility.
Loan terms vary greatly depending on the lender’s policies.
Who Should Consider Portfolio Loans:
Experienced investors looking to consolidate multiple mortgages or unlock equity.
Buyers with unique or unconventional properties.
Investors who want a tailored solution for complex financial profiles.
Specialized Condo Loans for Orlando’s Resort Market
Condo loans are specifically designed for purchasing units in condominium complexes, which are popular in Orlando’s resort and vacation communities.
Key Features of Condo Loans:
Lenders require a review of the property and the homeowners’ association (HOA) to ensure financial health and compliance.
Down payments are typically higher, often 20-30%.
Interest rates vary depending on the lender and market conditions.
Strong credit and stable income are required for approval.
The condo must meet specific guidelines regarding owner-occupancy rates, reserves, and insurance.
Special Considerations for Condo Investors:
Some condo complexes have restrictions on short-term rentals, which can affect both loan eligibility and rental potential.
Work with a lender and agent familiar with Orlando’s condo market to ensure your chosen property supports your investment strategy.
How to Choose the Right Loan for Your Orlando STR
Selecting the best financing option for your Orlando vacation rental investment is a strategic decision that should align with your financial goals, investment strategy, and the unique features of your target property. Here’s how to approach the process:
Assess your credit score, income, and overall financial profile.
Determine your intended use for the property—personal, rental, or a mix of both.
Compare loan types, down payment requirements, and interest rates.
Factor in closing timelines, documentation needs, and lender requirements.
Consult with a knowledgeable agent who understands the Orlando short-term rental market.
Bullet Point Summary of Loan Types:
Vacation Home Loans
10-20% down payment
Good credit and income required
Personal use required for part of the year
Some rental restrictions may apply
Conventional Mortgages
20-30% down payment
Strong credit and stable income required
Flexible terms (10-30 years)
PMI may be required for lower down payments
DSCR Loans
25-30% down payment
Approval based on property’s rental income
Suitable for variable or non-traditional income
Slightly higher interest rates
Longer closing times
Jumbo Loans
20-30% down payment
Excellent credit (700+)
Required for high-value/luxury properties
Extensive documentation and cash reserves needed
Portfolio Loans
20-30%+ down payment
Flexible underwriting and terms
Suitable for multiple or unique properties
Higher interest rates possible
Condo Loans
20-30% down payment
Strong credit and income required
HOA and property review required
Short-term rental restrictions may apply
Connect with the Baldor Group
Ready to start your Orlando vacation rental investment journey? The Baldor Group specializes in helping buyers and investors navigate the complexities of financing, property selection, and management. Our experienced agents provide personalized guidance, access to top lenders, and insider knowledge of the Orlando and Kissimmee markets.
Take the next step—contact the Baldor Group today to discuss your goals, explore your financing options, and discover the best properties for your needs.
