Investment property loans: down payment, rent math and qualifying
Reviewed by the Editorial Team · Updated October 18, 2026 · 9 min read
An investment property loan finances a home you will rent out instead of live in. Conventional rules ask for 15% to 25% down and six months of reserves, and they credit only 75% of the rent against the payment. That haircut, not the rate alone, decides how much you can borrow.
Key takeaways
Conventional investment loans ask for 15% down on one unit and 25% on two to four units, plus six months of reserves.
Lenders count only 75% of gross rent ($1,950 of $2,600 in the example) and subtract the full payment, so a rental often shows a shortfall.
On a $350,000 rental at 8.15%, rent minus PITI is −$714 a month with $52,500 down and −$454 with $87,500 down, and the shortfall is added to your debts.
Fannie Mae allows up to 10 financed properties, and an owner-occupied FHA loan on a two-to-four-unit building needs only 3.5% down.
Min. down payment
15% on one unit; 25% on two to four
Rent counted
75% of gross rent, minus full payment
Cash reserves
six months of payments
Min. credit score
620 on conventional loans
30-year fixed average7.18%Freddie Mac PMMS · Nov 5, 2026. Rental loans price above it.
Rent counted on $2,600$1,950/mo75% of gross rent, per conventional rules. vs the payment ↓
How an investment property loan works
A rental purchase is a non-owner-occupied loan, so lenders underwrite it as a higher risk than the home you live in. Conventional rental loans follow Fannie Mae and Freddie Mac rules, with a larger down payment, cash reserves and a rate premium.
Down payment: 15% on one unit, 25% on two to four
Rent credit: 75% of gross rent, minus the full payment
Reserves: six months of payments held in cash after closing
Pricing: a rate premium over owner-occupied loans of the same size
Most first-time landlords start here, because conventional loans usually carry the lowest rates among rental options. Buyers who outgrow the underwriting, hold title in an LLC or show little taxable income often move to a DSCR loan or a portfolio lender.
How much down payment a rental needs
Fannie Mae's eligibility matrix sets the floor at 15% down for a one-unit purchase and 25% for two to four units. The owner-occupied FHA route, open only if you live in one unit, is shown for contrast.
Minimum down payment on a $350,000 purchase
How much down payment a rental needs
Loan and property
Minimum down
Cash down
Investment loan, one unit
15%
$52,500
Investment loan, two to four units
25%
$87,500
FHA, two to four units, you live in one
3.5%
$12,250
Some lenders add overlays that ask for more than the matrix. The down payment by loan type reference lists minimums across programs.
How lenders count the rent
For the property you are buying, Fannie Mae counts 75% of gross rent and subtracts the full payment: principal, interest, taxes, insurance and any association dues. A shortfall is added to your monthly debts. A surplus counts in full only with 12 or more months of property-management experience.
What a rental loan costs once the rent is counted
Take a $350,000 rental that rents for $2,600 a month. At 8.15%, the 7.18% Freddie Mac average plus an illustrative investor premium, the lender credits only $1,950 of that rent against the payment. The table tests three down payments.
Worked exampleA $350,000 rental renting for $2,600 a month, at 8.15%
What a rental loan costs once the rent is counted
Down payment
Loan
PITI$450 taxes + insurance
Rent counted − PITI75% of rent
15% ($52,500)
$297,500
$2,664
−$714/mo
20% ($70,000)
$280,000
$2,534
−$584/mo
25% ($87,500)
$262,500
$2,404
−$454/mo
Rent the lender counts$1,950per month — 75% of $2,600, leaving room for vacancy and upkeep
Shortfall at 15% down−$714a negative figure is added to your debts when the lender figures your DTI
Rate: Freddie Mac's 30-year average 7.18% (Nov 5, 2026) + 0.97 percentage points for a rental: Fannie Mae's investment-property and 740–759 credit-score price adjustments at 20% down come to 3.875% of the loan beyond what the average borrower pays, at about 0.25% of rate per point. Conventional rules: 15% down on one unit, 25% on two to four units. Run the payment
At $52,500 down, PITI is $2,664 against $1,950 of counted rent, so rent minus PITI is −$714 a month. The lender adds that shortfall to your monthly debts when it calculates your DTI.
More cash narrows the gap without closing it. With $87,500 down, PITI falls to $2,404 and the result is still −$454. At this rent and price, the rental never carries itself in the lender's math at any down payment shown.
A rent credit is not a profit forecast
The lender's 75% is an underwriting cushion for vacancy and upkeep, not a prediction of what you will keep. Your real cash flow also depends on repairs, management and months without a tenant.
Costs that never show up in the rate quote
The note rate understates what a rental takes to carry. Four items sit outside the rate and the PITI line:
Mortgage insurance: due below 20% down, and not included in the PITI above
Reserves: six months of payments held back as cash
Vacancy and repairs: months without rent still carry the full payment
To test your own price, down payment and rate, enter them in the mortgage calculator, add taxes and insurance, and compare the payment with 75% of the rent you expect.
When an investment property loan goes wrong
Rental loans go wrong in the gap between the rent a lender counts and the rent a tenant pays. Four risks cause most of the damage:
Negative carry: payments above rent, with your savings covering the gap
Vacancy: empty months that still owe the full payment
Repair shocks: a roof or furnace bill drawn from reserves
DTI squeeze: a rent shortfall that cuts what you can borrow next
Fannie Mae's Selling Guide turns this risk into arithmetic. Section B3-3.8-02 credits 75% of gross rent and adds any negative result to your monthly debts, and B3-4.1-01 sets reserve minimums on top. Together they test whether you can absorb a shortfall, not just whether the property can.
Stress-test before you bid
Subtract PITI from 75% of expected rent and treat any shortfall as debt. Then rerun the deal with a vacant month and a repair fund. If your reserves and DTI still hold, proceed; if not, change the price or the down payment.
Investment property loan vs. DSCR, hard money and FHA multi-unit
Four loans can finance a property with tenants, but each judges something different: your income, the property's rent, the deal's exit plan, or the unit you live in.
Four ways to finance a rental or multi-unit purchase
Investment property loan vs. DSCR, hard money and FHA multi-unit
Investment property loan
DSCR loan
Hard money loan
FHA multi-unit
Best for
Buy-and-hold with documented income
Investors qualifying on the rent
Flips and fast closings
Living in one unit of a small building
Occupancy
Not owner-occupied
Not owner-occupied
Not owner-occupied
You live in one unit
Minimum down
15% one unit, 25% two to four
Commonly 20–25%
Commonly 20–30% borrower equity
3.5%
Income test
Your income plus 75% of rent
Rent against payment, often 1.0 or higher
Mostly the property and exit plan
Your income; rent from other units can count
Term
Up to 30 years
Often 30 years
Commonly 6–24 months
Up to 30 years
Watch for
Reserves and the rent shortfall
Prepayment penalty, often 3–5 years
Rates of 8–15% plus points
Occupancy rules and mortgage insurance
A DSCR loan tests a property's rent against its payment instead of your tax returns, which suits investors with thin taxable income. A hard money loan is a short bridge for flips, not a long-term rental mortgage.
Who an investment property loan fits
An investment property loan fits buyers who can carry a rental through a lean year and still qualify for the next purchase.
12 months of property-management experience to count surplus rent
Skip it if you plan to flip within months, since hard money fits short holds better. Skip it too if you would live in one unit of a small building: an owner-occupied FHA loan asks only 3.5% down.
Investment property loans: pros and cons
Pros
Builds equity in an income-producing asset
Tenant rent can cover much of the payment
Up to 10 financed properties under Fannie Mae rules
Expenses and depreciation reduce taxable rental income
Cons
Larger down payment than an owner-occupied loan
Rate premium over owner-occupied pricing
Rent counted at 75%, shortfall counted as debt
Reserves required, plus vacancy and repair risk
What lenders look for in a rental buyer
Underwriters run the usual mortgage checks, then add rental tests. Expect a credit score of at least 620 on conventional loans, a down payment of 15% or more, six months of reserves, and debt-to-income near 45%, up to 50% for strong files.
Beyond the first rental, the count matters. Fannie Mae allows up to 10 financed properties per borrower, and reserve requirements rise with each added loan. Rental income and depreciation are reported on your tax return as IRS Publication 527 describes.
Requirements at a glance
Down payment of 15% on one unit, 25% on two to four units
Credit score of 620 or higher on conventional loans; higher scores price better
six months of payments in reserves, more with other financed properties
Rent credited at 75% of gross rent, minus the full payment; any shortfall counts as debt
Debt-to-income of 45% or lower at many lenders, up to 50% at some
No more than 10 financed properties under Fannie Mae rules
What is the minimum down payment for an investment property loan?
Fannie Mae's conventional rules set it at 15% for a one-unit purchase and 25% for two to four units. On a $350,000 one-unit rental that is $52,500; on a two-to-four-unit building at the same price, $87,500.
Lenders can add stricter requirements of their own, and mortgage insurance applies below 20% down.
Do I have to put 20% down on an investment property?
No — Fannie Mae's floor is 15% on a one-unit rental, though some lenders ask for more and two to four units need 25%.
More cash lowers the payment: in this guide's $350,000 example, moving from $52,500 to $87,500 down cuts PITI from $2,664 to $2,404. Below 20% down, mortgage insurance is added.
What credit score do you need for an investment property loan?
Conventional loans generally start at a 620 minimum, but rentals carry loan-level price adjustments that grow as scores fall, so a higher score earns a cheaper rate. DSCR lenders commonly ask for 620–680.
Score rarely decides it alone; down payment, reserves and the rent shortfall matter as much.
Is it hard to get an investment loan?
It is harder than buying a home to live in, but the hurdles are known: a 15% to 25% down payment, six months of reserves, and a debt-to-income ratio that includes any rent shortfall.
In this guide's example, $52,500 down leaves a monthly gap of −$714 that counts as debt.
Can rental income help you qualify for an investment property loan?
Yes, but only part of it. For the property you are buying, Fannie Mae counts 75% of gross rent and subtracts the full payment.
A shortfall is added to your debts, and a surplus counts as income only with 12 or more months of property-management experience. DSCR loans instead test the rent against the payment directly.
How many investment property mortgages can you have?
Fannie Mae allows up to 10 financed properties for one borrower on conventional loans. Reserve requirements grow as you add properties, and each new payment enters your debt-to-income ratio.
When conventional limits pinch, investors usually turn to DSCR or portfolio lenders that qualify on the property's rent.
Are investment property rates higher than primary residence rates?
Yes. Fannie Mae and Freddie Mac charge loan-level price adjustments on rentals, so the note rate runs above an owner-occupied loan of the same size. This guide's example uses 8.15%: the 7.18% Freddie Mac average plus an illustrative premium. Your own premium depends on credit score, down payment and number of units.
Can you borrow more money for an investment property?
Yes, within three limits. The down-payment rule caps the loan, your debts including any rent shortfall must fit the lender's DTI limit, and Fannie Mae stops at 10 financed properties.
Equity from a home you own can fund the down payment, but that new payment counts as debt too.
Can you use an FHA or VA loan to buy an investment property?
Not for a pure rental, because both programs require you to live in the home. The workaround is house hacking: buy a two-to-four-unit building, live in one unit and rent the rest.
FHA allows 3.5% down on that purchase with a 580 score, against 25% for the same building as an investment.
What are the requirements for an investment property loan?
For a conventional loan, expect 15% to 25% down, a credit score of 620 or higher, and six months of reserves. The lender verifies your income, counts 75% of the rent against the payment and orders an appraisal with a rent estimate. Financed properties are capped at 10.
This guide is general information, not a lending decision. Program rules and dollar limits change — verify current figures with a licensed lender and confirm licensing at NMLS Consumer Access. See all loan types.
Nothing matches that. Try “refinance”, “FHA”, “Texas”, “Rocket” or “PMI”.