Is House Hacking Still a Smart Strategy in 2026? What Lenders Now Look For

House hacking—or buying a property and renting out part of it to offset the mortgage—is a strategy that has gained traction in recent years. For first-time homebuyers, this offers several advantages, including building equity and paying off debt more quickly.

But in 2026, with higher home prices, elevated mortgage rates, and stricter lending standards, is the tactic still viable?

While housing experts agree that house hacking remains an option, it is no longer the quick wealth-building tactic it once was.  

“With today's higher home prices and elevated mortgage rates, it’s shifting toward a long-term affordability strategy rather than a quick path to short-term profit,” explains Kathy Herig, SVP of enterprise credit policy at mortgage lender loanDepot.

Why house hacking took off—and when it peaked

Homebuyers have been using house hacking to rent out everything from basement apartments and spare bedrooms to even accessory dwelling units (ADUs). You can also invest in a multifamily residence and rent out one unit while living in another.

This approach gained popularity during the pandemic due to low mortgage rates and rising rents, which made buying a home a more prudent financial option than renting. 

“It probably peaked between 2020–2022, when buyers could buy a two- to four-unit property, use projected rents, and lock in a rate under 3%. That combo no longer exists—and that’s the real shift,” says Paul Leara, mortgage broker and owner, Mountain Mortgage.

Previously, experts praised house hacking as a great entry point for first-time buyers and younger investors, as low fixed rates and projected rental income could provide immediate monthly relief.

Sasha Poparic, founder of Immobilium Real Estate, noted that this offered a practical way to enter homeownership, as living on site allowed buyers to offset part of their housing costs with rent, qualify more easily using rental income, and start building equity sooner.

“For many younger buyers, it felt like a disciplined step toward ownership rather than a speculative investment,” Poparic said.

Will house hacking still work in 2026? What experts and lenders say

Now, the macroeconomic drivers that made house hacking a worthwhile strategy for homebuying have shifted.

Numbers speak for themselves: on Dec. 31,  2020, the 30-year average mortgage rate stood at 2.65%; on Dec. 30, 2021, it stood at 3.11%; and on Dec. 29, 2022, it jumped to 6.42%, according to Freddie Mac data.

Since then, rates have remained high: As of Dec. 24, 2025, the 30-year fixed-rate mortgage averaged 6.18%, and Realtor.com® expects them to average 6.3% in 2026.

As for home prices, Realtor.com expects them to rise by 2.2% in 2026.

Michael Nouri, founder of real estate development firm Nouri Group, deems house hacking “largely an interest rate story” and argues that when rates were in the 2% to 3% range, the math was forgiving.

“Rental income could easily cover most or all of a mortgage, even at aggressive prices," he says. "Lenders were comfortable stretching assumptions because debt was cheap, monthly payments were low, and refinancing felt inevitable."

That arithmetic has changed as rates moved into the 6% range, monthly payments jumped, even though prices didn’t fall enough to offset them, he explains.

“The same property that once carried itself now requires real out-of-pocket support. This forced a reset in both lender behavior and borrower expectations,” Nouri adds.

Several experts have noted that lenders have become stricter, making house hacking more difficult.

Nouri notes that today, banks are underwriting conservatively: They want to see that the borrower can service the debt without relying on perfect occupancy or rising rents.

“Rental income helps, but it no longer defines the deal; it simply reduces the burden,” he says.

LoanDepot’s Herig also points out that in 2026, lenders will look closely at your property type, which is commonly limited to two- to four-unit properties or single-family homes with ADUs.

“And your financial strength matters. It's critical that you have a solid credit score, adequate cash reserves, and a manageable debt-to-income ratio,” she says.

Finally, according to Immobilium’s Poparic, lenders no longer view house hacking as a creative workaround.

“They want borrowers who can realistically carry the mortgage even if rental income changes. Documented income, reasonable assumptions, and financial stability matter far more now than creative projections,” Poparic adds.

Is house hacking shifting from a “get rich quick” strategy to a long-term affordability play?

Several experts agree that while the approach to house hacking has changed, it can still be worthwhile.

“It’s no longer about living for free. It’s about making ownership workable. If rental income cuts a mortgage in half, that’s a win, even if it doesn’t eliminate it," Nouri says. "In many markets, that still puts the owner well below the cost of renting, while building equity instead of paying a landlord."

So, can this still work in 2026?

“Yes—but not the way TikTok sold it,” says Mountain Mortgage’s Leara. “The strategy has shifted from hype to discipline.”

Leara adds that house hacking still works best in high-rent markets where demand is durable—college towns and medical hubs, and urban cores and dense suburbs with strong roommate demand.

“It’s no longer about overnight wealth—it’s about controlling housing costs, keeping cash invested elsewhere, and letting time do the work,” he says. “House hacking isn’t dead—the shortcuts are. In 2026, the winners are buyers who treat it as a long-term housing strategy first and an investment second.”

Finally, for homebuyers considering this approach in 2026, experts recommend doing so carefully and selectively.

Bobbi Rebell, CFP, a consumer finance expert at CardRates.com, recommends that house hackers be much more conservative in their financial assumptions, including being realistic about rental prices and maintaining a larger cash reserve.

“If everything has to be perfect to make it work, that is a red flag," she says. "There has to be a lot of wiggle room along with some well-planned backup plans should things go awry."