Investment Property Loan – Make Your Money Work for You
Buying a rental or investment property? This loan is designed for landlords and real estate investors. Typically requires higher down payments & stricter approval, but it’s how you start building wealth through real estate.
Best for: Investors looking to buy rental properties or flips.
- Pros:
- Helps you build wealth through real estate
- Rental income can help cover the mortgage
- Cons:
- Higher interest rates than primary home loans
- Usually requires 20-25% down payment
The 3 Types of Occupancy
1: Owner-Occupied / Primary Residence (Your Main Home)
A primary residence is the home you live in for most of the year. To qualify, at least one borrower must live in the home and sign the mortgage paperwork.
Why It Matters:
- Lowest down payment & best interest rates
- More loan options (FHA, VA, USDA, Conventional)
- Must be your primary home—not a rental
2️: Second Home / Vacation Home
A second home is a property you use for personal reasons, not rental income. Lenders generally require it to be at least 50 miles from your primary residence to ensure it’s truly a vacation home.
Why It Matters:
- Lower down payment than investment properties
- Can’t be a rental or used for short-term Airbnb
- Requires good credit & stable income
3️ Investment Property (Rental Property)
An investment property is a home you don’t live in but rent out for income. Since these loans are riskier for lenders, they require higher down payments and stricter approval requirements.
Why It Matters:
- Higher down payments (20-25%)
- Stricter credit & income requirements
- Can be used for long-term or short-term rentals (Airbnb, VRBO, etc.)
Occupancy Type | Minimum Down Payment | Notes |
|---|---|---|
Primary Residence | 0% (VA & USDA), 3.5% (FHA), 5-25% (Conventional) | Best loan terms & lowest rates. |
Second Home | 10% down (purchase), 25% equity (refinance) | Can’t be a rental property. |
Investment Property | 20-25% down (varies by units) | Stricter requirements; cash-out refis require 70% LTV or lower. |
Important Note: If your loan amount is considered "high balance" (above standard conforming limits), LTV & credit score requirements may change.
Why Does Occupancy Type Matter?
Lenders assess risk based on how you plan to use the home. Primary residences have the lowest risk (you live there), while investment properties are riskier (if you have financial trouble, you’re more likely to default on a rental before your own home). That’s why investment loans require larger down payments and higher credit scores.
If you’re unsure which loan is right for you, let’s chat and find the best option for your goals!