Investment property loans are fundamentally different from primary
residence mortgages. Lenders view rental properties as higher risk, so
requirements are stricter:
higher down payments, higher credit scores, more reserves, and higher
rates. Expect to pay 0.5-1% more in interest than on a primary residence.
Investment Property Loan Types
Conventional Investment Loans
15-25% down. 700+ FICO recommended. 6+ months reserves.
75% of projected rental income can be used to qualify (appraiser
provides market rent estimate). Fannie Mae allows up to 10 financed
properties. Rates 0.5-1% higher than primary residence. Best for:
investors with strong credit and significant cash reserves.
DSCR Loans (Debt Service Coverage Ratio)
20-25% down. No personal income verification.
Qualification based on property cash flow, not your personal income.
DSCR = rental income ÷ mortgage payment (must be ≥ 1.0-1.25). No tax
returns, pay stubs, or W-2s required. 620+ FICO. Best for:
self-employed investors, investors who've maxed out conventional
loans, or anyone wanting income-free qualification.
Portfolio Loans
Flexible terms — set by the lender. Held by the
lender, not sold to Fannie/Freddie. Can have unique features:
interest-only periods, blanket loans (multiple properties under one
loan), rehab-to-rent programs. Higher rates but more flexibility.
Best for: unique situations that don't fit conventional guidelines.
FHA Multi-Unit (House Hacking)
3.5% down. Must occupy one unit. FHA allows 2-4
unit properties with just 3.5% down if you live in one unit. This is
the lowest-barrier entry to real estate investing. Rental income
from other units can help you qualify. After 1 year, you can move
out and keep the FHA loan. Best for: first-time investors wanting to
start with low capital.
Investment Property Requirements at a Glance
| Requirement |
Investment Property Standard
|
| Down Payment |
15-25% (conventional); 20-25% (DSCR); 3.5% (FHA owner-occupied
multi-unit)
|
| Credit Score |
680+ (conventional); 620+ (DSCR); 580+ (FHA) |
| Cash Reserves |
6-12 months PITI for each investment property (conventional). 2-6
months for DSCR.
|
| DTI |
Max 45% (conventional — all property mortgages counted). N/A for
DSCR loans.
|
| Rental Income |
75% of market rent can offset mortgage. Must be documented (lease
or appraiser estimate for new purchase).
|
The BRRRR Strategy & Financing
The BRRRR method (Buy, Rehab, Rent, Refinance, Repeat) is one of the
most popular real estate investing strategies. Financing each phase:
Buy + Rehab: Hard money or private money loan, or cash.
Refinance: After rehab and tenant placement, refinance
into a conventional or DSCR loan based on the new, higher appraised
value. The goal: pull your original cash out (or more) to fund the next
deal. Dream Financial Management can connect you with lenders for both
the short-term acquisition and the long-term refinance phases.
