How to Finance an Investment Property
Last reviewed August 2026
Financing a rental works differently from buying a home to live in: bigger down payments, stricter credit, higher rates — and more options than most first-time investors realize. Here are the ways to fund a deal, what lenders look for, and how to qualify.
What lenders require
Because a rental is a non-owner-occupied (investment) property, lenders treat it as higher risk and tighten their terms. Across most loan types, expect:
- 20–25% down — sometimes more for multi-unit properties.
- A credit score near 680+, with the best rates at 740 and above.
- Rates ~0.5–1% higher than a comparable primary-residence loan.
- Cash reserves — often several months of payments per property.
- Proof the rent supports the loan — either your income (DTI) or the property's (DSCR).
See exactly what a given loan means for your payment and cash-to-close with the investment property mortgage calculator.
Your financing options
There's no single "right" way to finance a rental — the best choice depends on your income, credit, how many properties you own, and your strategy.
Conventional mortgage
The standard route: a fixed-rate loan qualified on your income and credit. Expect 20–25% down and a rate roughly 0.5–1% above a primary residence. Best for W-2 buyers with a strong debt-to-income ratio.
DSCR loan
Qualifies the loan on the property's income (its debt-service coverage ratio), not your tax returns. Popular with investors because it scales without your personal DTI getting in the way — usually at a slightly higher rate.
Portfolio / commercial loan
Held by a local bank or credit union rather than sold to Fannie/Freddie, so terms are flexible and can cover multiple units or unusual properties. Often used once you outgrow conventional limits.
HELOC or cash-out refinance
Tap the equity in a home you already own to fund a down payment (or a full purchase). Powerful for repeat buyers, but it puts your existing property on the line.
Private or hard money
Short-term, asset-based loans from individuals or funds — fast and flexible, but expensive. Mostly for flips and BRRRR deals you'll refinance out of, not long-term holds.
Partnerships & seller financing
Bring in a partner's cash, or have the seller carry the loan. Creative options that can work when a traditional lender won't, with terms you negotiate directly.
How to strengthen your application
Whatever route you take, a few moves improve your terms: raise your credit score before you apply, keep your debt-to-income ratio low, put more down to improve the debt-service coverage ratio, and line up reserves so an underwriter sees a cushion. And shop it — an investor-focused mortgage broker can surface DSCR and portfolio options a retail bank won't.
Above all, make sure the deal works before you finance it. A great loan on a bad rental is still a bad investment — run the full numbers and the verdict first.
Frequently asked questions
How much down payment do I need for an investment property?
Most conventional investment-property loans require 20–25% down, and some lenders or multi-unit properties want more. It's higher than a primary residence because lenders see rentals as higher risk. A larger down payment also lowers your payment, improving cash flow and your debt-service coverage ratio.
What credit score do I need to finance a rental?
Expect lenders to want a credit score around 680 or higher for a conventional investment-property loan, with the best rates reserved for 740+. DSCR and portfolio lenders may be more flexible, often at a higher rate. Improving your score before applying can meaningfully lower your payment.
What is a DSCR loan and who is it for?
A DSCR (debt-service coverage ratio) loan qualifies the property on its own rental income rather than your personal income — no W-2s or tax returns. Lenders check whether the rent covers the mortgage at their required ratio (often 1.20–1.25). It's popular with self-employed investors and anyone scaling past conventional limits.
Why are investment property mortgage rates higher?
Lenders view rentals as riskier than a home you live in — if money gets tight, borrowers tend to prioritize their own residence. To offset that default risk, investment-property rates typically run about 0.5%–1% higher than a comparable primary-residence loan, and down payment and credit requirements are stricter.
Do I need cash reserves to qualify?
Often, yes. Many lenders want to see several months of mortgage payments in reserve per property, on top of your down payment and closing costs, as a cushion against vacancies and repairs. Budget for reserves as part of your true cash-to-close, not an afterthought.
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