How investment property mortgages differ
Loans on rental properties cost more than loans on a home you live in, because lenders see more risk. Expect:
- Larger down payments: usually 15% to 25% for a single-family rental and 25% or more for 2 to 4 units.
- Higher rates: often 0.5 to 1 percentage point above owner-occupied rates, plus pricing adjustments for credit score and LTV.
- Reserves: many lenders want several months of payments in the bank.
- DSCR loans: some lenders qualify you based on the property's rent instead of your income, using the debt service coverage ratio.
Payment formula
Payment = L × r ÷ (1 − (1 + r)^−n)
where L is the loan amount, r the monthly interest rate (annual rate ÷ 12) and n the number of monthly payments. PITI adds monthly property tax and insurance (and HOA, if any).
What is DSCR?
For a DSCR loan, lenders commonly divide gross monthly rent by PITIA (principal, interest, taxes, insurance and HOA). A ratio of 1.0 means rent exactly covers the payment; many programs want 1.1 to 1.25 for the best pricing. Note that this lender-style DSCR uses gross rent, while the DSCR in our rental property calculator uses net operating income, which is more conservative.
Frequently asked questions
How much do I need to put down on an investment property?
Conventional loans typically require 15% for a single-family investment property and 25% for 2 to 4 units. DSCR loans commonly require 20% to 25%.
Can I use rental income to qualify?
Yes. Conventional lenders usually count about 75% of expected rent; DSCR lenders qualify the loan mostly on the property's rent relative to its payment.
Why is my investment property rate higher?
Borrowers are statistically more likely to default on a rental than on their own home, so lenders charge more and require more equity.
Last reviewed: 2026-10-09