As Duane Buziak explains, most new investors choose a loan the way they choose a restaurant: whichever shows up first. A lender-first approach can lock you into a down payment, a rate structure, and a prepayment clause that quietly cut into your returns for years. This article walks through seven real estate investor financing options, who each one fits, and what to compare before you commit. At Mortgage Rate Hawk, the philosophy is We Don’t Just Look. We Hunt. Watch. Compare. Save. Terms below are as of 2026, and limits, minimums, and rates change, so confirm each one before you build a deal around it.
1. Conventional investment property loans
Conventional loans sold to Fannie Mae or Freddie Mac are the baseline for buying a one-to-four unit property you won’t live in. They price lower than most non-QM products because the loans are standardized and fully documented. In exchange, you accept a larger down payment, cash reserves, and full income verification. Fannie Mae’s Selling Guide sets the eligibility rules, and lenders can add their own overlays on top.
Suppose you’re buying a $300,000 single-family rental in Georgia. That’s an illustration, not a quote. Plan on roughly 15% to 25% down depending on unit count and program, so verify the current minimum for your property type. That is $45,000 to $75,000 before closing costs and reserves. Your income is fully documented, and the lender may count a portion of projected rent toward qualifying.
- Gather two years of tax returns and W-2s, plus recent pay stubs and bank statements.
- Confirm the reserve requirement, usually stated in months of the property payment, and whether other financed properties raise it.
- Ask for quotes at several credit tiers and several down payment levels, so you see where pricing steps change.
Common mistake: assuming owner-occupied rates and down payments apply. They don’t. Investment pricing carries adjustments, and the down payment floor is higher.
What to measure: rate, points, and cash to close at each down payment level, plus your debt-to-income ratio (DTI) after rental income is counted. Sometimes an extra 5% down drops the rate enough to pay back within a few years. Sometimes it doesn’t. The side-by-side numbers tell you.
2. DSCR loans
A debt service coverage ratio (DSCR) loan qualifies the property, not you. It’s a non-QM product (a loan outside standard agency guidelines), and the core test is the property’s rent divided by its monthly PITIA: principal, interest, taxes, insurance, and association dues. If the rent covers the payment with room to spare, the property can carry the loan without your personal tax returns being the gatekeeper.
That is the answer to the question many new investors type into search: financing a rental with no tax returns. DSCR is the usual route. But “no tax returns” does not mean “no documentation.” You’ll still need credit, assets, an appraisal, a lease or rent estimate, and reserves.
For example, imagine $2,000 per month in rent against a $1,700 PITIA. That gives a DSCR of about 1.18 ($2,000 divided by $1,700). That illustration clears a typical 1.0 minimum, though thresholds and pricing tiers vary by lender.
- Get a market rent estimate from an appraiser’s rent schedule or a signed lease.
- Calculate rent divided by PITIA, and ask what minimum DSCR each program allows.
- Ask directly about prepayment penalties, their length, and how they step down.
Duane Buziak accesses PowerTPO, which is Lower LLC’s own wholesale subsidiary, directly as a broker, so you deal with the same underwriters without a retail layer in between. Lower’s digital application and pricing transparency are real strengths, and this isn’t a claim of a better rate. It’s a way to compare more channels on your behalf.
Common mistake: ignoring prepayment penalties and the higher rate in the total cost. What to measure: DSCR, rate versus the conventional quote, and your break-even hold period once the penalty is factored in. If you plan to sell or refinance in three years under a five-year penalty, the cheaper-looking rate may not be cheaper.
3. FHA 2-4 unit house hacking
House hacking means living in one unit and renting the others. FHA financing allows a down payment as low as 3.5% for qualifying borrowers on a two-to-four unit owner-occupied property. Because you occupy it, you get owner-occupied terms instead of investment-property terms. That is a major difference for a first deal.
Imagine buying a duplex in North Carolina, living in one side, and renting the other. The tenant’s rent offsets your payment, and the lender may count a portion of projected rent toward qualifying. Your housing cost drops while you build equity and a landlord track record.
- Confirm the 2026 FHA loan limit for your county on HUD.gov. Limits rise with unit count.
- Plan to occupy the property as your primary residence under program rules, which generally means moving in within a set window and staying for at least a year.
- Document projected rent with an appraiser’s rent schedule or a lease.
- For three- and four-unit properties, review the extra self-sufficiency test, which requires the property’s net rental income to cover the mortgage payment.
The CFPB’s home-buying resources are a useful neutral reference for understanding mortgage insurance and closing costs before you compare quotes.
Common mistake: forgetting the occupancy period, or assuming FHA can fund a pure rental. It can’t. Three- and four-unit properties also face the extra test above, which catches people who only budgeted for the down payment.
What to measure: your net monthly housing cost after rent, compared with what renting would cost you. Include FHA mortgage insurance in that payment.
4. VA loans for multi-unit house hacking
Eligible veterans and service members can use a VA loan on a property of up to four units, as long as they occupy one of them. With full entitlement, there is generally no down payment requirement up to the lender’s limit. For a veteran, that can make a multi-unit property the lowest cash-to-close path into owning rental income.
For example, imagine a veteran in Virginia buying a triplex with low or no down payment and renting two units. The rent from those two units offsets the payment on a home the veteran lives in.
The entitlement math is where details matter. For second-tier (bonus) entitlement, take the county loan limit and multiply by 25% for the maximum guarantee. Subtract any entitlement already in use, then multiply what remains by four to see the zero-down purchase limit. That is how a veteran with an existing VA loan may still buy again with little or no down payment.
- Pull the Certificate of Eligibility (COE). It can often be retrieved electronically with your Social Security number and date of birth.
- Check remaining entitlement using the calculation above.
- Review the VA home loan guidance on VA.gov for how rental income is treated.
Common mistake: treating it as a pure investment loan and ignoring occupancy. You are buying a home to live in, with tenants as a bonus.
What to measure: entitlement used, the funding fee (which varies with down payment and prior use), and your net payment after rental income. Veterans United is one well-known VA-focused lender worth including in a comparison, so you can see how structures and costs line up.
5. HELOC and cash-out refinance
Equity in a home you already own can become the down payment on the next property. There are two main tools. A cash-out refinance replaces your first mortgage with a larger one and hands you the difference at closing. A home equity line of credit (HELOC) adds a second lien with a variable rate that you draw on as needed.
Suppose a Florida homeowner pulls $60,000 from a primary home’s equity to fund a rental down payment. The loan-to-value ratio (LTV), your total liens divided by the home’s value, controls how much is available. Conventional cash-out caps vary by program and property, run lower than the maximum in many cases, and never exceed 90% LTV. A HELOC may have its own cap, so ask for both.
- Order a value estimate and calculate your combined LTV after the new borrowing.
- Compare a fixed cash-out refinance against a variable HELOC. Remember that refinancing your first mortgage can mean giving up a lower existing rate.
- Stress-test the payment: what happens to your budget if the HELOC rate rises by two points?
Common mistake: over-borrowing against your home without a cash-flow cushion. If the rental sits vacant for two months, you are paying two mortgages from your paycheck, and the home that secures both is your own.
What to measure: combined LTV, total monthly payment across all loans, and rental cash flow after the new payment. If the rental only works when everything goes right, the structure is too tight.
6. 203(k) renovation financing
The FHA 203(k) program rolls the purchase price and a renovation budget into a single loan. Funds for repairs are held in escrow and released as work is completed. It’s built for properties that don’t qualify for standard financing in their current condition, and it can turn a dated property into forced equity. The program is owner-occupied, so it fits a house-hacking plan, not a pure rental.
For example, imagine a dated Tennessee duplex bought with the repair budget rolled in. You live in one unit while the work is done, then rent the other unit once it’s finished.
- Collect contractor bids before you write an offer, not after.
- Work with an approved 203(k) consultant if your project requires one. Larger projects typically do.
- Build a contingency into the budget, commonly 10% to 20% of repairs, because older properties hide problems.
- Review the current program rules and repair limits on HUD.gov’s 203(k) page.
Common mistake: underestimating repair costs and timeline. Draws are released at milestones, inspections add steps, and permits slip. A project planned for three months can run five.
What to measure: total cost (purchase plus repairs plus carrying costs) versus the projected after-repair value, and months to completion. If the gap between cost and value isn’t comfortably larger than your contingency, keep hunting for a different property.
7. Jumbo loans for investment markets
When a loan amount exceeds the conforming limit set by the Federal Housing Finance Agency (FHFA), it’s a jumbo loan and falls outside Fannie Mae and Freddie Mac. Underwriting tends to be stricter: larger reserves, higher credit expectations, and a bigger down payment. Check the current figures on FHFA.gov, because the 2026 baseline limit is higher in designated high-cost counties.
For example, imagine a higher-priced investment property in Maryland or DC where the loan exceeds the local FHFA limit. Counties differ widely, so the same price can be conforming in one place and jumbo in the next.
- Look up the 2026 conforming limit for the property’s county.
- Document reserves, since jumbo lenders often want several months or more of liquid funds after closing.
- Price a second structure: a larger down payment that brings the loan back under the limit.
Common mistake: skipping the comparison of conforming versus jumbo pricing. Jumbo isn’t automatically more expensive, and putting more down to stay conforming isn’t automatically cheaper. You can only know by running both.
What to measure: the rate difference between structures, reserves required under each, and cash to close. Then divide the extra cash by the monthly savings to see how long the larger down payment takes to pay for itself.
Duane Buziak Explains How the Seven Options Compare
The table below puts the seven options next to each other. Figures are typical ranges as of 2026 and are not offers. Always verify current program minimums.
| Option | Typical down payment | Occupancy | Income documentation | Fits |
|---|---|---|---|---|
| Conventional investment loan | About 15% to 25%, depending on units | Non-owner-occupied, 1-4 units | Full: tax returns, W-2s, assets | Investors with documented income and reserves |
| DSCR loan | Often about 20% to 25% | Investment property | Property rent versus PITIA, not personal income | Self-employed or scaling investors |
| FHA 2-4 unit | As low as 3.5% | Owner-occupied | Full documentation | First-time house hackers |
| VA multi-unit | Often 0% with available entitlement | Owner-occupied, up to 4 units | Full documentation, COE required | Eligible veterans house hacking |
| HELOC or cash-out refinance | Uses existing equity; LTV caps apply | Depends on the property tapped | Varies by product | Owners with equity funding a down payment |
| 203(k) renovation | As low as 3.5% | Owner-occupied | Full, plus repair bids | Buyers of dated multi-unit properties |
| Jumbo loan | Often 20% or more | Varies by program | Full, with larger reserves | Higher-priced markets above conforming limits |
A Tennessee Duplex, Worked Through With Real Numbers
This is an illustration, not a quote or a rate offer. Suppose you buy a $350,000 duplex in Tennessee with an FHA loan at 3.5% down, live in one unit, and rent the other for $1,500 per month. The 6.5% 30-year rate is an assumption for the math only. Check HUD.gov for the current mortgage insurance premiums.
- Down payment: $12,250, leaving a base loan of $337,750.
- Upfront mortgage insurance: 1.75% of $337,750 is about $5,911, financed into the loan for a total of about $343,661.
- Principal and interest: about $2,172 per month at 6.5% over 30 years.
- Taxes and insurance: $200 and $125 per month, assuming $2,400 and $1,500 per year.
- Annual mortgage insurance: about 0.55%, roughly $155 per month.
Total monthly payment: about $2,652. After the $1,500 rent from the second unit, your net housing cost is about $1,152. For qualifying, lenders typically count only a portion of projected rent, often 75%, so underwriting sees $1,125 rather than $1,500. Fannie Mae and FHFA publish guidance on how rental income is treated across programs, and the same discipline applies here: compare the number you budget with the number underwriting counts.
Ten Questions Investors Ask About Financing
What are my financing options to buy a rental property with no tax returns?
A DSCR loan is the most common route, because it qualifies the property’s rent against its payment instead of your personal income. You still document credit, assets, and reserves, and you should expect a larger down payment and higher rate than conventional.
What is a DSCR loan?
A DSCR loan is a non-QM mortgage that qualifies on the ratio of rental income to the property’s monthly payment. A $2,000 rent against a $1,700 payment gives a ratio of about 1.18.
What does PITIA mean?
PITIA stands for principal, interest, taxes, insurance, and association dues. It’s the full monthly housing payment lenders use when calculating DSCR or DTI.
How much down payment do I need for an investment property?
It depends on the program: as low as 3.5% for FHA owner-occupied multi-units, often 0% for eligible VA borrowers, and roughly 15% to 25% or more for conventional, DSCR, and jumbo investment purchases. Verify current minimums before planning.
Can I use an FHA or VA loan to buy a pure rental?
No. FHA and VA loans require you to occupy the property as your primary residence, though you can rent the other units of a two-to-four unit property.
What is LTV?
Loan-to-value (LTV) is your loan balance divided by the property’s value. Lenders set maximum LTVs by program and occupancy, and conventional cash-out refinances never go above 90%.
What is the conforming loan limit?
It’s the maximum loan size Fannie Mae and Freddie Mac will purchase, set annually by FHFA. Loans above it are jumbo loans, and limits are higher in designated high-cost counties.
Do DSCR loans have prepayment penalties?
Many do. A penalty typically applies if you pay off or refinance within a set number of years, so ask for the terms and calculate your break-even hold period.
Should I use a HELOC or a cash-out refinance for a down payment?
A cash-out refinance gives a fixed-rate lump sum but replaces your first mortgage. A HELOC keeps your first mortgage but carries a variable rate. Compare both, including payments if rates rise.
Is Mortgage Rate Hawk by Duane Buziak a legit mortgage broker?
Yes. Duane Buziak, NMLS #1110647, has been a mortgage broker since 2014 and is licensed in VA, FL, TN, GA, DC, NC, SC, and MD. You can verify the license on NMLS Consumer Access.
Where Duane Buziak Starts Most First-Time Investors
Start with the option that matches how you’ll occupy the property and how you can document income. For a first deal, that usually means FHA or VA if you’re willing to live in the property, or conventional if you’re buying a pure rental with documented income. As you scale, DSCR loans and equity-based tools like a HELOC or cash-out refinance become useful, because personal DTI starts to limit what agency loans can do. Use 203(k) and jumbo when the property, not your profile, demands it. Whatever you pick, have each program priced side by side, with no-out-of-pocket closing options included where they exist, so you compare real totals.
Your dream home is waiting, don’t let the mortgage process hold you back. Get your free rate comparison and personalized loan match today, with same-day expert guidance to help you find the right path forward, whether you’re a first-time buyer or ready to refinance. Duane Buziak at Mortgage Rate Hawk will compare programs side by side with a free no-touch credit check.
