Types of Investment Property Loans
Investment property financing comes in many forms. We'll help you find the loan program that aligns with your investment strategy and financial goals.
Conventional Investment Loans
The most common option for investment properties. Conventional loans offer competitive rates with down payments ranging from 15% to 25%, depending on the number of units and your financial profile.
DSCR Loans (Debt Service Coverage Ratio)
Qualify based on the property's rental income rather than your personal income. DSCR loans are ideal for self-employed investors or those with complex tax returns who want to leverage the property's cash flow for approval.
Portfolio Loans
Held by the lender rather than sold on the secondary market, portfolio loans offer more flexible terms and underwriting criteria. A strong option for investors who don't fit traditional lending guidelines.
Fix and Flip Loans
Short-term financing designed for purchasing and renovating properties for resale. Fix and flip loans provide fast funding with terms typically ranging from 6 to 18 months.
Investment Property Loan Requirements
Investment property loans have stricter requirements than primary residence mortgages. Here's what lenders typically look for:
Higher Down Payment (15-25%)
Investment properties require a larger down payment than primary residences. Expect to put down 15% for a single-unit property and up to 25% for multi-unit properties. A larger down payment can also help you secure better interest rates.
Higher Credit Score (680+)
Most lenders require a minimum credit score of 680 for investment property loans. Scores of 740 or higher will qualify you for the most competitive rates and terms available.
Cash Reserves (6+ Months)
Lenders want to see that you have at least six months of mortgage payments in reserve for the investment property. This demonstrates your ability to cover payments during vacancies or unexpected expenses.
Higher Interest Rates
Investment property mortgage rates are typically 0.50% to 0.75% higher than rates for primary residences. This reflects the increased risk lenders assume when financing non-owner-occupied properties.
Benefits of Investment Property Financing
Build Long-Term Wealth
Real estate has historically been one of the most reliable ways to build wealth over time through property appreciation and equity growth.
Rental Income
Generate consistent monthly cash flow from tenants that can cover your mortgage payment, property expenses, and provide passive income.
Tax Advantages
Investment property owners can deduct mortgage interest, property taxes, insurance, depreciation, and maintenance costs from their taxable income.
Portfolio Diversification
Adding real estate to your investment portfolio reduces overall risk by diversifying across asset classes that don't always move in sync with the stock market.
Frequently Asked Questions
How much do I need to put down on an investment property?
Most investment property loans require a down payment of 15% to 25%. Single-unit properties typically require 15% to 20% down, while multi-unit properties (2-4 units) may require 20% to 25%. A larger down payment can help you secure better rates.
What is a DSCR loan and how does it work?
A DSCR (Debt Service Coverage Ratio) loan qualifies you based on the property's rental income rather than your personal income. If the property's rental income covers the mortgage payment (typically at a 1.0 to 1.25 ratio), you may qualify regardless of your personal debt-to-income ratio.
Can I use rental income to qualify for the loan?
Yes, in many cases. For conventional investment loans, lenders may count up to 75% of expected rental income toward your qualifying income. With DSCR loans, the property's rental income is the primary qualification factor.
Are interest rates higher for investment properties?
Yes, investment property mortgage rates are generally 0.50% to 0.75% higher than rates for primary residences. This premium reflects the increased risk associated with non-owner-occupied properties. Your rate will also depend on your credit score, down payment, and loan type.
How many investment properties can I finance?
With conventional financing, you can finance up to 10 properties total (including your primary residence). Portfolio and DSCR lenders may allow additional properties beyond this limit, depending on your overall financial strength and experience as an investor.