Financing investment property comes with different terms than financing a home you’ll live in. Expect a larger down payment — typically 20–25% — a somewhat higher interest rate, and stricter reserve requirements, since lenders view non-owner-occupied property as higher risk than a primary residence.
Common loan types for investors
- Conventional investment loans — standard financing with investor-specific pricing and down payment requirements, subject to limits on the number of financed properties you can hold at once
- DSCR loans — qualify based on the property’s projected rental income (debt service coverage ratio) rather than your personal income, useful for investors with multiple properties or less conventional income documentation
- Portfolio loans — held by the lender rather than sold to Fannie Mae or Freddie Mac, sometimes offering more flexibility for investors who don’t fit standard guidelines
- Cash-out refinance — tapping equity from a property you already own to fund your next purchase
How this connects to your strategy
Which financing option makes sense depends on your broader plan. See Buying Your First Rental Property in the Bay Area if this is your first purchase, or House Hacking if you’re planning to live in part of the property, since owner-occupant financing generally offers better terms than pure investment loans.
Run your expected numbers against the loan terms you’re quoted using Cap Rate and Cash Flow Basics before committing, since financing costs directly determine your monthly cash flow.
Financing from a distance
If you’re buying property you won’t be living near, Buying Bay Area Property as an Out-of-State Investor covers some of the extra financing and logistics considerations that come with that.
Return to the Investing in Bay Area Real Estate guide for the rest of the investing topics.
Shopping for the right loan
Financing investment property is worth shopping across multiple lenders and loan types before committing, since terms can vary more than they do for owner-occupied loans. Ask each lender which loan types they offer for investors, how many financed properties they’ll allow you to hold at once, and whether a DSCR or portfolio option might get you better terms than a standard conventional investment loan given your specific income and portfolio size. A mortgage broker who works regularly with investors can sometimes surface options a single lender wouldn’t offer on its own.
Using home equity to fund an investment purchase?
If financing your next investment property depends on tapping equity or selling a home you currently own, get a free estimate at the Home Value Estimator and see the Seller’s Guide.
This page is general information, not lending advice. Investment property loan terms, down payment requirements, and eligibility vary significantly by lender and loan type — consult a licensed mortgage professional for terms specific to your situation.
Laxmi Penupothula · Intero Real Estate · DRE #02047105 · Serving Fremont, Milpitas, San Jose, Santa Clara, Union City & Newark. Equal Housing Opportunity.