Reviewed by the Editorial Team · Updated July 10, 2026 · 6 min read
Financing a rental property costs more than buying a primary residence: conventional lenders typically want 15-25% down, stronger credit, and cash reserves, plus a rate that runs higher than an owner-occupant loan.
Key takeaways
Financing a rental property costs more than a primary residence, with conventional lenders typically requiring 15-25% down versus far less for owner-occupants.
Rates run higher than an owner-occupant loan of the same size, and lenders require cash reserves beyond what's needed for closing.
Rental income can help offset the payment during underwriting, and interest plus other expenses are often tax-deductible.
It suits landlords and buy-and-hold investors building equity across multiple properties, not one-time owner-occupant buyers.
Min. down payment
15-25% for conventional investment loans
Min. credit score
620 typical, 680+ for best pricing
Key cost
Rate premium over an owner-occupant loan
Best for
Landlords and buy-and-hold investors
How investment property loans work
Lenders classify a rental purchase as non-owner-occupied, which changes the underwriting from the start. Because you won't live in the home, the lender assumes more risk if payments stop — and prices the loan accordingly.
Conventional investment loan: standard income-and-credit underwriting through Fannie Mae/Freddie Mac rules
DSCR loan: qualifies on the property's rental income instead of your personal income
Portfolio loan: held by the lender itself, with more flexible but pricier terms
Many investors close title in an LLC for liability protection
Most first-time investors start with a conventional loan, then add DSCR or portfolio financing as their rental portfolio grows past what conventional guidelines allow.
The rate premium and reserve requirement
Investment loans cost more on every axis: a bigger down payment, a stricter credit score, and a note rate commonly a quarter- to full point above an owner-occupied loan of the same size.
RESERVES
Lenders often require six months or more of mortgage payments in reserve for every financed rental property you already own — cash that has to sit untouched at closing.
Closing in an LLC adds friction, too: many conventional lenders won't lend to an entity directly, which is why DSCR and portfolio loans dominate LLC purchases.
Ways to lower the down payment on a rental property
Standard investment-property financing rarely gets below 15% down, but a few paths can lower the bar if you're willing to change the deal structure.
Buy a 2-4 unit property, live in one unit, and qualify with an owner-occupant FHA or VA loan
Bring in a co-borrower who will occupy the property
Use a HELOC or cash-out refinance on an existing home to fund the down payment
Look for seller financing or an assumable loan on the target property
Who an investment property loan fits
Investment property loans fit buyers who want to build rental income and can absorb the higher down payment and reserve requirements up front.
A credit score of 680 or higher for the best conventional pricing
15-25% saved beyond closing costs and reserves
Landlords buying to hold and rent long-term
Investors who'd rather title in an LLC and qualify on rental income
Investors buying to renovate and resell fast may fit a hard money loan better than a long-term rental mortgage, while those short on personal income documentation often turn to a DSCR loan instead.
Investment Property Loans: pros and cons
Pros
Builds equity in an income-producing asset
Rental income can offset the payment
Interest and expenses may be tax-deductible
Financing available across multiple properties
Cons
Larger down payment than owner-occupied loans
Higher rate than a primary-residence mortgage
Cash reserves required beyond closing costs
Vacancy and maintenance costs fall on you
Requirements at a glance
15-25% down payment on most conventional investment loans
Credit score of 620+ typical, 680+ for the best pricing
Six or more months of reserves per financed rental property
Debt-to-income calculated with a share of projected rental income
DSCR programs qualify on the property's rent instead of personal income
LLC purchases generally require a DSCR or portfolio loan, not conventional
What credit score do I need for an investment property loan?
Most conventional lenders set a 620 floor, but pricing improves meaningfully at 680 and above since investment loans already carry a rate premium. DSCR and portfolio lenders sometimes work with lower scores in exchange for a larger down payment or higher rate.
Can I get an investment property loan in an LLC?
Yes — but usually not through a conventional Fannie Mae or Freddie Mac loan, which typically requires the borrower to be an individual.
DSCR loans and portfolio loans are built for LLC ownership, qualifying on the property's rental income rather than your personal tax returns.
How much down payment for an investment property?
Expect 15-25% for a conventional investment loan, well above the 3-5% possible on a primary residence. DSCR and portfolio loans can require even more down, often 20-30%, since they skip personal income verification and lean harder on the property itself.
Is it hard to get a loan on an investment property?
It's harder than financing a primary home: lenders want a higher credit score, a bigger down payment, and cash reserves covering several months of payments on top of the new loan.
The property also has to appraise and, for many programs, show it can support its own payment through market rent.
What is the 50% rule in rental property?
The 50% rule is a quick screening estimate assuming roughly half of a rental's gross income goes toward operating expenses — taxes, insurance, maintenance, vacancy, and management — before the mortgage payment.
It's a back-of-envelope filter for comparing deals, not a substitute for a real income and expense analysis.
What is the 1% rule in property investing?
The 1% rule suggests a rental's monthly rent should equal at least 1% of its purchase price to have a reasonable shot at cash-flowing.
It's a starting filter mainly useful in lower-priced markets; in many higher-cost metros few properties clear that bar even when they're still sound long-term investments.
How does an investment property loan work?
It works like a standard mortgage but with tighter underwriting: lenders typically require 15-25% down, price it as non-owner-occupied, and may count a share of projected rental income toward qualifying. html">DSCR loans for larger holdings.
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.
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