Published October 1, 2026 · Chicago Condo Loans Editorial Team · How we research
Quick answer Fannie Mae now has a dedicated rule for counting short-term rental income from the property you’re financing (Selling Guide B3-3.8-03). Lenders must use it for applications dated December 1, 2026 or later and may adopt it sooner. It applies only to one-unit investment properties that are legally allowed to operate as short-term rentals. On a purchase, the lender estimates rent from a long-term rent schedule or from three comparable short-term rentals, counts 50% of it, and subtracts your full monthly payment. A positive result can only offset the unit’s own payment; a negative result is added to your debts. In Chicago, the building’s rules and the city’s shared housing restrictions decide whether a condo can be a short-term rental at all.
This update is part of our guide to investment condo loans and second homes, within our complete guide to condo loans in Chicago.
What changed?
In Selling Guide Announcement SEL-2026-08 (September 2, 2026, updated September 23), Fannie Mae reorganized its rental income rules into six sections, B3-3.8-01 through B3-3.8-06. Two are new: one for short-term rental income from the property being financed and one for investment properties bought within 45 days of the property being financed. Lenders are encouraged to apply the new rules now and must apply them to applications dated December 1, 2026 or later (the original date was November 1). Ask your lender which version it is using.
Who can use short-term rental income?
- One-unit investment properties only. A condo you’ll live in, or use as a second home, can’t count short-term rental income under this rule.
- The rental must be legal, including any local registration and licensing.
- No accessory units. Short-term rental income can’t come from an ADU.
- Your current housing payment must be documented before any rent from the property can be used.
Fannie Mae defines a short-term rental as a furnished home rented for brief periods, typically less than 30 consecutive days, rather than under a standard long-term lease.
How is the income calculated on a purchase?
| Step | What the lender does |
|---|---|
| 1. Estimate market rent | Uses either a Form 1007 rent schedule based on standard long-term rentals, or validated short-term rental data from the MLS or property management companies |
| 2. Validate the comparables | Three comparable short-term rentals, from the same building or market area when possible, with their daily, weekly or monthly rates, the number of days each was rented last calendar year, and anything that could affect short-term rental use |
| 3. Compute market rent from comparables | Averages the comparables’ rates and multiplies by their average number of days rented |
| 4. Apply the 50% factor | Counts 50% of gross monthly rent as net rental income; the other 50% covers vacancy and maintenance |
| 5. Subtract the payment | Net rental income minus the unit’s full payment (principal, interest, taxes, insurance and association dues) gives the adjusted net rental income |
If the result is positive, it can offset the unit’s payment but can’t be added to your income. If it’s negative, the shortfall counts as a monthly debt.
Example: three comparable units averaged $200 a night and were rented an average of 180 nights last year. That’s $36,000 a year, or $3,000 a month. The lender counts 50%, or $1,500. If the unit’s full monthly payment is $2,300, the $800 shortfall is added to your debts. If the payment is $1,400, the rent covers it, but the extra $100 doesn’t count as income.
On a refinance, if the property appears on Schedule E of your most recent tax return, the lender instead uses a cash-flow analysis of Schedule E averaged over 12 months, minus the payment. If it isn’t on your return yet, the 50% method applies.
Can your Chicago condo be a short-term rental?
Fannie Mae’s rule only works if the rental is legal, and in Chicago several layers decide that:
- City registration. Under Chicago’s shared housing rules, a unit in a building with 5 or more units doesn’t have to be the host’s primary residence, but units in single-family and 2 to 4 unit buildings do.
- Prohibited buildings and zones. A unit can’t be listed if its building is on the city’s Prohibited Buildings List, if the condo association’s rules or the lease prohibit it, or if it’s in a Restricted Residential Zone.
- The building’s own rules. Many Chicago associations ban or limit short-term rentals, and Illinois law applies a building’s use rules to tenants.
- Hotel-style buildings. Separately from your income, Fannie Mae won’t finance units in projects run like hotels, such as those where the association or management company offers short-term rentals, rental pools or hotel services. See the high-rise and condo-hotel guide.
Investment condos also carry higher down payments, reserves and pricing adjustments than homes you live in. Our investment and second-home condo guide covers those numbers.
Frequently asked questions
Can I use Airbnb income to qualify for a Chicago condo loan?
Under Fannie Mae’s new rule, only for a one-unit investment property that can legally operate as a short-term rental. The lender counts 50% of the estimated rent, and any positive result can only offset the unit’s own payment.
When do Fannie Mae’s new rental income rules take effect?
Lenders must apply them to applications dated December 1, 2026 or later and may apply them sooner.
Can I count short-term rental income on a second home?
No. The short-term rental income rule covers one-unit investment properties only, and rent from a second home generally can’t be used to qualify.
Sources
- Fannie Mae Selling Guide B3-3.8-03: Rental Income from the Subject Property: Short-Term Rental (09/02/2026)
- Fannie Mae Selling Guide Announcement SEL-2026-08
- Fannie Mae Selling Guide B4-2.1-03: Ineligible Projects
- City of Chicago: Shared housing registration eligibility
- Illinois Condominium Property Act, 765 ILCS 605/18
Educational content only, not lending, legal or tax advice. See our Disclaimer.