Financing an investment property is different from financing a home you plan to live in. Lenders generally ask for more cash down, higher credit scores and proof of reserves. These five steps help you prepare.

1. Build your credit and cash position first

Investor loans usually require a larger down payment than owner-occupied loans, commonly 15–25%. Check your credit report for errors, pay down revolving balances and keep your savings in an account you can document.

2. Understand the loan options

• Conventional investor loans use your income and tax returns.
• DSCR loans qualify you on the property's rental income. See DSCR vs. conventional loans.
• Bridge and fix-and-flip loans are short-term options for properties that need work.

3. Run the numbers on the property, not just the price

Estimate rent, taxes, insurance, vacancy, maintenance and management. Use our DSCR calculator to see whether the rent comfortably covers the payment.

4. Keep cash reserves

Lenders often want several months of payments in reserve, and you will want a buffer for repairs and vacancies. Do not spend your last dollar on the down payment.

5. Compare multiple lenders

Rates, fees, down payment rules and prepayment penalties vary significantly. Request quotes from at least three lenders and compare the full cost, not just the rate. Start with our lender directory.

Mistakes first-time investors make

• Counting rent as profit. Rent is not cash flow until you subtract the mortgage, taxes, insurance, vacancy, repairs and management.
• Skipping the inspection. Repair costs can erase a thin margin.
• Financing at the maximum. A highly leveraged property has less room for vacancies or rate changes.
• Applying before you are ready. Large deposits, new credit accounts or job changes during underwriting can delay or derail approval.

A simple timeline

1. 3 to 6 months out: check credit, build savings and decide on a target price range.
2. 2 months out: get pre-approved with two or three lenders and compare quotes.
3. Under contract: schedule the appraisal and inspection, lock insurance quotes and keep your finances stable.
4. Closing: bring funds as directed and review the closing disclosure line by line.

Frequently asked questions

How much do I need to put down? Investment property loans often require more than owner-occupied loans, commonly 15% to 25% depending on the program.

Can I use a loan meant for owner-occupants? Not for a property you will not live in. Misrepresenting occupancy is mortgage fraud.

Should I buy a single-family home or a small multifamily? It depends on price, rents and how much management you want. Run the numbers for both with our DSCR calculator.

This article is for educational purposes only and is not financial advice. Terms vary by lender; confirm current requirements before applying.