DSCR Loans for Airbnb and Short-Term Rentals in Arizona
Yes, you can finance an Airbnb or other short-term rental in Arizona with a DSCR loan, and Pillar Mortgage Group in Scottsdale places these loans by qualifying the property on its rental income instead of your tax returns. The two questions every lender asks on an STR file are how the short-term income is documented and whether the property can legally operate under its city's permit rules, and this guide answers both.
Quick facts
- Pillar Mortgage Group places DSCR loans down to a 0.75 ratio, and financing in an LLC is allowed (Pillar Mortgage Group, DSCR Loans, accessed October 25, 2026).
- Expect credit around 660 or higher, typically 20 to 25% down, and reserves of roughly 3 to 6 months, with no tax returns or W-2s (Pillar Mortgage Group, DSCR Loans, accessed October 25, 2026).
- Arizona cities may not prohibit short-term rentals, but they may require a permit with a fee capped at the lesser of actual cost or $250 (A.R.S. 9-500.39, accessed October 25, 2026).
- State law lets cities require at least $500,000 in aggregate liability coverage on each short-term rental (A.R.S. 9-500.39, accessed October 25, 2026).
- Annual permit fees: Scottsdale $250 per property, Sedona $210 per unit, Flagstaff $250 (Scottsdale, Sedona, Flagstaff, accessed October 25, 2026).
Can you use a DSCR loan for an Airbnb in Arizona?
Yes. A DSCR loan is a business purpose investment loan that asks one question: does the property's rent cover its monthly payment? For a long-term rental the rent is a lease or a market rent estimate. For an Airbnb or VRBO property, the rent is short-term booking income, which swings by season and has to be documented differently. Many DSCR programs accept short-term rental income, and some apply extra conditions such as a higher minimum ratio, added reserves, or a cap on how much projected income counts. Terms vary by lender and program, which is why Pillar Mortgage Group shops multiple wholesale DSCR lenders instead of fitting your property into one bank's rules (Pillar Mortgage Group, DSCR Loans, accessed October 25, 2026).
The core numbers we can state are on our DSCR loans page: ratios down to 0.75, financing in an LLC, credit around 660 or higher, typically 20 to 25% down, reserves of roughly 3 to 6 months, and loan amounts up to $5 million. You qualify on the property, not on tax returns or W-2s.
How lenders document short-term rental income
Lenders generally use one of three methods to turn Airbnb income into a monthly rent figure for the ratio. Which one applies depends on whether the property already has a booking track record and on the lender's program.
| Method | When it is used | What the lender reviews |
|---|---|---|
| 12 month booking history | Refinances, or purchases of an operating STR with records | Platform payout reports and statements from Airbnb or VRBO, matching bank deposits, and occupancy by month, averaged over 12 months |
| Market data report (for example AirDNA) | Purchases with no history, or a conversion from long-term rental | Projected annual revenue, average daily rate and occupancy for comparable listings near the subject property |
| Appraiser short-term rental addendum | Most STR files, alongside one of the methods above | The appraiser's own analysis of comparable short-term rentals, in addition to the standard long-term rent schedule |
Most lenders want the appraisal and the income source to agree. If the AirDNA projection says one thing and the appraiser's short-term comparables say another, expect the lender to use the more conservative figure. Lenders also tend to look at gross revenue after platform fees, and some programs reduce projected income further for vacancy or management. Ask early which number your program will use, because it drives the whole ratio.
For comparison, conventional financing is stricter. Fannie Mae allows short-term rental income only on one-unit investment properties that are legally permitted to operate as short-term rentals, and on a purchase it counts 50 percent of monthly gross rent, which can only offset the property's own payment (Fannie Mae Selling Guide B3-3.8-03, dated September 2, 2026). That gap is a big reason investors use DSCR loans for STRs. We compare the two side by side in DSCR loan vs conventional investment property loan in Arizona.
How the DSCR math works for a short-term rental
The formula is the same as any rental: average monthly rental income divided by the monthly PITIA payment (principal, interest, taxes, insurance and any HOA dues). The difference is the income input. A short-term rental's income is usually annualized and divided by 12 so a slow August in Scottsdale or a quiet spring shoulder season in Flagstaff does not sink the ratio. Our step by step walkthrough is in how to calculate DSCR.
Here is a simple illustration with hypothetical numbers, not a quote. A property with documented gross bookings of $48,000 over 12 months averages $4,000 a month. If its full PITIA payment is $3,200, the ratio is 4,000 divided by 3,200, or 1.25, before any adjustment a lender's program applies. If a program counted only part of that revenue, the ratio would fall, which is why the documentation method matters as much as the property itself.
Arizona short-term rental law: A.R.S. 9-500.39
Arizona's statute sets the outer limits on what cities and towns can do. A city or town may not prohibit vacation rentals or short-term rentals, but it may regulate them for health and safety, zoning and nuisance purposes, and it may require the following (A.R.S. 9-500.39, accessed October 25, 2026):
- A local permit or license, with a fee no higher than the lesser of the actual cost of issuing it or $250.
- An emergency contact who can respond to complaints, with a civil penalty of up to $1,000 for every 30 days the owner fails to provide one after notice.
- Written notice to adjacent single-family neighbors and those directly and diagonally across the street before the first rental, with a signed attestation.
- The permit or license number displayed in every advertisement.
- Liability insurance of at least $500,000 in the aggregate, or a listing through a platform that provides equal or greater coverage.
- Owner residency on the property when it has an accessory dwelling unit whose certificate of occupancy was issued on or after September 14, 2024.
The statute also tells cities to issue or deny a permit within seven business days of a complete application, and it allows a permit suspension of up to 12 months after three verified violations within 12 months. Civil penalties for repeat violations at one property start at up to the greater of $500 or one night's advertised rent and rise to up to the greater of $3,500 or three nights' rent for a third violation. A suspended permit is a lender issue, because it stops the income the loan was underwritten on.
Scottsdale, Sedona and Flagstaff permit rules
Each city layers its own process on top of the state rules. The table summarizes each official city page as of the access date shown in the sources.
| City | Permit and fee | Key owner requirements | Official page |
|---|---|---|---|
| Scottsdale | Annual license, $250 per property, for rentals of fewer than 30 days | Arizona TPT license listing the Scottsdale region code, at least $500,000 liability coverage, neighbor notification within 30 days of receiving the license with a signed attestation, registration with the Maricopa County Assessor before occupancy, a posted safety notice inside the front door and primary backyard door, and pool barrier compliance | City of Scottsdale, Information for Owners and Operators |
| Sedona | City permit for every unit, $210 per unit per year, non-refundable | TPT license before advertising, at least $500,000 aggregate liability per unit, neighbor notice by certified mail or hand delivery, guest sex offender check at least 24 hours before check in, permit number on every listing, and no weddings or for-profit events; penalties of $500 to $3,500 and suspension of up to 12 months | City of Sedona, Property Owner Responsibilities |
| Flagstaff | Annual Short Term Rental License, $250 at application and each renewal | TPT license that lists the property address as a location, annual written notice to adjacent, across and diagonal single-family neighbors with a 24 hour emergency contact, plus the state insurance and advertising rules | City of Flagstaff, STR Property Owners |
For local market numbers and more city detail, see our guides to DSCR loans in Sedona and DSCR loans in Flagstaff. Phoenix runs its own STR permit program, covered in DSCR loans in Phoenix, and nearby Valley markets are in DSCR loans in Tempe and DSCR loans in Chandler. HOA covenants can still restrict short-term rentals even where the city allows them, so read the CC&Rs before you write an offer.
What a lender checks on an Arizona STR file
- That the property can legally operate as a short-term rental, including the city permit or license and the state TPT license.
- That the HOA or condo association, if any, permits rentals of fewer than 30 days.
- The income documentation method and the figure the program will use in the ratio.
- Insurance that covers short-term rental use, at or above the city and state minimums.
- Reserves, which on our programs run roughly 3 to 6 months of payments.
- Vesting, since many STR owners close in an LLC to separate the rental from personal assets.
If you are still choosing a property, you can browse current Arizona listings on Arizona Luxury Property Search and then send us the address so we can test the ratio before you write an offer. Investors who already own an STR and want to pull equity out should read DSCR cash out refinance in Arizona, and buyers coming from another state should read buying Arizona rental property from out of state. Our broader overview, short-term rental loans in Arizona, covers conventional and second home options too.
Every lender treats short-term income a little differently, so the surest way to a real answer is a conversation. Book a call with Blake Hermann, Director of Lending, and bring the address, the booking history or AirDNA report, and the permit status.
Frequently asked questions
Can I get a DSCR loan for an Airbnb in Arizona?
Yes. Pillar Mortgage Group places DSCR loans on Arizona short-term rentals by qualifying the property on its rental income instead of your tax returns or W-2s. Ratios down to 0.75 are accepted and you can close in an LLC. Whether a lender counts short-term income, and how much, varies by lender and program.
How do lenders verify Airbnb income for a DSCR loan?
Lenders generally use a 12 month booking history from platform payout reports and bank deposits, a market data report such as AirDNA for properties without history, and an appraiser short-term rental addendum based on comparable listings. The income is usually averaged over 12 months to smooth seasonality.
Can an Arizona city ban short-term rentals?
No. A.R.S. 9-500.39 says a city or town may not prohibit vacation rentals or short-term rentals. Cities can require a permit with a fee capped at the lesser of actual cost or $250, an emergency contact, neighbor notice, the permit number on listings, and at least $500,000 in liability coverage.
How much do short-term rental permits cost in Scottsdale, Sedona and Flagstaff?
As of October 25, 2026, Scottsdale charges $250 per property per year, Sedona charges $210 per unit per year, and Flagstaff charges $250 at application and at each annual renewal, according to each city's official short-term rental page.
Can I buy a short-term rental in an LLC with a DSCR loan?
Yes. Pillar Mortgage Group allows DSCR financing in the name of an LLC. Expect credit around 660 or higher, typically 20 to 25% down, and reserves of roughly 3 to 6 months of payments.
Sources
- Pillar Mortgage Group, DSCR Loans program page, accessed October 25, 2026. https://pillarmortgagegroup.com/dscr-loans
- Arizona Revised Statutes 9-500.39, Limits on regulation of vacation rentals and short-term rentals, accessed October 25, 2026. https://www.azleg.gov/ars/9/00500-39.htm
- City of Scottsdale, Vacation and Short-Term Rentals: Information for Owners and Operators, accessed October 25, 2026. https://www.scottsdaleaz.gov/codes-and-ordinances/vacation-and-short-term-rentals/information-for-owners-and-operators
- City of Sedona, Short-Term Rentals: Property Owner Responsibilities, accessed October 25, 2026. https://www.sedonaaz.gov/your-government/departments-and-programs/community-development/short-term-rentals/property-owner-responsibilities
- City of Flagstaff, STR Property Owners, accessed October 25, 2026. https://www.flagstaff.az.gov/4537/STR-Property-Owners
- Fannie Mae Selling Guide B3-3.8-03, Rental Income from the Subject Property: Short-Term Rental, dated September 2, 2026. https://selling-guide.fanniemae.com/sel/b3-3.8-03/rental-income-subject-property-short-term-rental
Written by Blake Hermann, Director of Lending, NMLS #2271358, Pillar Mortgage Group, Scottsdale, Arizona.
Equal Housing Opportunity. Informational only, not a commitment to lend. Programs subject to change and borrower qualification. Company NMLS #2700076.
