Investment Property Loans: Down Payment, Rates, and Requirements for Rental Properties
Investment property loans let you finance rental properties and income-producing real estate. Conventional is the primary program — requiring 15–25% down, 620+ credit, and 6+ months of reserves. Rates run 0.5–0.75% higher than primary residence loans, and loan-level pricing adjustments stack on top of the base rate.
FHA and VA do not allow investment properties. USDA does not either. The only government-adjacent option is buying a 2–4 unit property as a primary residence (house-hacking) and renting the extra units — which qualifies for FHA at 3.5% down or VA at $0 down. Beyond that, conventional, portfolio, and DSCR loans are the paths.
Conventional Requirements
- Down payment: 15% for single-unit, 25% for 2–4 unit investment properties
- Credit score: 620 minimum; 720+ for best rate pricing and lowest LLPAs
- Reserves: 6 months PITI for the investment property plus 2 months for each other financed property
- Rental income: 75% of projected rent can count toward qualifying income (25% vacancy factor)
DSCR Loans
- No income verification: Qualification based on property cash flow, not borrower personal income
- DSCR ratio: Rental income must cover at least 1.0–1.25x the mortgage payment (principal, interest, taxes, insurance)
- Down payment: 20–25% typical; some lenders offer 15% with strong DSCR ratios
- Best for: Self-employed investors, high-net-worth borrowers, or investors with 5+ financed properties
House-Hacking Alternative
- Buy 2–4 units as primary: Live in one unit, rent the others — qualifies for primary residence financing
- FHA: 3.5% down on a 2–4 unit primary, rental income from other units counted at 75%
- VA: $0 down on 2–4 units with full rental income offset — the cheapest multi-unit entry path
- Conventional: 5% down on 2–4 unit primary (some lenders 15%) with rental income counted
Cost Factors
- Rate premium: 0.5–0.75% above primary residence rates on conventional investment property
- LLPA stacking: Investment property LLPAs stack on top of credit and LTV adjustments — significant cost increase
- PMI: Not typically applicable since 15–25% down eliminates it, but available on some 10% programs
- Insurance: Landlord/investment property insurance costs 15–25% more than standard homeowners policies
How much down payment do I need for an investment property?
15% for a single-unit rental, 25% for 2–4 units on conventional. Portfolio and DSCR lenders may vary. The only way to finance a rental with less than 15% down is the house-hack strategy — buying a 2–4 unit property as your primary residence with FHA (3.5%), VA ($0), or conventional (5%) primary residence pricing.
Can I use rental income to qualify for the loan?
Yes. Conventional allows 75% of projected rental income (from a signed lease or appraiser’s market rent estimate) to offset the property’s mortgage payment. DSCR loans go further — they qualify entirely based on the property’s rental income versus its debt service, ignoring your personal income completely.
How many investment properties can I finance?
Fannie Mae and Freddie Mac allow up to 10 financed properties total (including your primary residence). Above 4 financed properties, requirements tighten: 720+ credit, 25% down on each, and 6 months reserves per property. Beyond 10, you need portfolio or DSCR lenders who set their own limits.
The Bottom Line Up Front
Investment property financing costs more than primary residence — higher down payment, higher rates, and higher reserves. The cheapest entry into rental real estate is the house-hack: buy a 2–4 unit property as your primary residence with FHA at 3.5% down or VA at $0 down, live in one unit, and rent the others. For dedicated investment properties, conventional at 15–25% down is the standard path. DSCR loans serve investors who cannot or prefer not to verify personal income.
Conventional Investment Property Requirements
Conventional is the most common investment property financing. The requirements are stricter than primary residence across every dimension — down payment, credit, reserves, and pricing.
Fannie Mae and Freddie Mac cap investment property LTV at 85% for single-unit (15% down) and 75% for 2–4 units (25% down). Credit floor is 620, but pricing adjustments at lower scores make the effective minimum more like 680 for a reasonable rate. Reserves of 6 months PITI are required on the investment property, plus 2 months per additional financed property you own.
Lender Reality Check
Investment property LLPAs are brutal below 720 credit. A 680-credit borrower at 75% LTV (25% down) pays roughly 1.75–2.5% more in LLPAs than the same borrower on a primary residence at the same LTV. That translates to 0.375–0.625% higher rate — on a $300K loan, that is $100–$175/month more. Get your credit above 720 before buying investment if possible.
DSCR Loans: Income-Based on the Property, Not You
Debt Service Coverage Ratio loans qualify based on the property’s rental income relative to its mortgage payment. If the rent covers 1.0–1.25x the total monthly payment (PITIA), the loan qualifies — regardless of your personal income, DTI, or employment status.
DSCR loans are portfolio products offered by non-QM lenders. Rates run 0.5–1.5% above conventional. Down payment is typically 20–25%. Credit minimums range from 660 to 700. The advantage is speed, simplicity, and the ability to scale beyond the 10-financed-property conventional limit without personal income documentation.
House-Hacking: The Cheapest Way to Start
Buying a 2–4 unit property as your primary residence qualifies for primary residence financing — dramatically lower down payment and better rates than investment property pricing. You live in one unit and rent the others.
FHA allows 3.5% down on a 2–4 unit primary. VA allows $0 down. Conventional allows 5% on a 2-unit primary (some lenders require 15% on 3–4 units). Rental income from the non-owner-occupied units counts at 75% toward qualifying. This is the most capital-efficient entry into rental real estate.
Deal Saver
On a VA loan for a 4-unit property, you put $0 down, pay no PMI, and collect rent from 3 units. If total rent is $4,500/month and your mortgage is $3,200/month, you live essentially rent-free while building equity. After meeting the occupancy requirement (typically 12 months), you can move out, keep the property as a full rental, and buy your next primary residence.
How Rental Income Affects Qualification
On conventional investment property loans, the lender counts 75% of the property’s projected rental income toward your qualifying income. The 25% haircut accounts for vacancy and maintenance. Projected rent comes from either a signed lease or the appraiser’s market rent analysis.
If the 75% rental income covers the full PITIA payment, the property is essentially self-qualifying — it adds zero net debt to your DTI. If 75% of rent does not cover the payment, the difference adds to your DTI as additional monthly debt. Properties with strong rent-to-mortgage ratios qualify more easily.
Financing Multiple Investment Properties
Fannie and Freddie allow up to 10 financed properties per borrower. Properties 5–10 require 25% down, 720+ credit, and 6 months reserves per property — the requirements escalate specifically to manage portfolio risk.
Above 10 financed properties, conventional conforming is no longer available. Portfolio lenders and DSCR lenders fill this gap with their own underwriting standards. Some DSCR lenders have no limit on financed properties as long as each property meets the cash flow threshold independently.
File Guidance
If you own 5+ financed properties, find a loan officer who specializes in investor files. The reserve calculations, rental income documentation, and LLPA stacking on properties 5–10 are complex enough that generalist loan officers frequently miscalculate qualification or miss programs that would work. Investor-specialist LOs handle these files daily.
The Bottom Line
Investment property financing is more expensive and demanding than primary residence. Start with a house-hack (2–4 unit primary) to get the lowest possible entry cost, then scale into dedicated investment properties with conventional or DSCR financing as your equity and portfolio grow. Credit above 720, 25% down, and 6 months reserves per property are the numbers to hit for the best conventional investment pricing.
Frequently Asked Questions
Can I use an FHA loan for a rental property?
Not directly. FHA requires primary residence occupancy. However, you can buy a 2–4 unit property with FHA at 3.5% down, live in one unit, and rent the others. After meeting the occupancy requirement, you can convert to a full rental — but the FHA loan stays on the property.
What is a good DSCR ratio for an investment property?
1.25x or higher is strong — meaning rent covers 125% of the mortgage payment. 1.0x (break-even) is the typical minimum for DSCR loan qualification. Higher DSCR ratios get better rates and lower down payment requirements from DSCR lenders.
Are investment property mortgage rates higher?
Yes. Expect 0.5–0.75% above primary residence rates on conventional. DSCR loans run 0.5–1.5% above conventional. The premium reflects higher default risk on non-owner-occupied properties. LLPAs add further cost, especially below 720 credit.
Can I do a cash-out refinance on an investment property?
Yes, at 70–75% LTV maximum on conventional. The rate and LLPAs are the highest of any refinance transaction type. VA cash-out is not available for investment property. Some portfolio lenders offer cash-out on investment at 65–70% LTV.
Do I need landlord insurance for a financed rental?
Yes. Your lender requires a landlord or dwelling fire policy — standard homeowners insurance does not cover tenant-occupied properties. Landlord policies cost 15–25% more than homeowners and include liability coverage for tenant injuries and property damage claims.
Resources Used
Last updated: April 18, 2026 · Reviewed by The Lenders Network Editorial Team