Types of loans available for newbie investors and reqiurements
Involved In Real Estate · Brooklyn, NY · Member since 2014 · 59 posts · 8 votes
Types of loans available for newbie investors and reqiurements
Most Popular Reply
Ray WilliamsBusiness Member
Lender · Denver, CO · Member since 2017 · 179 posts · 82 votesAnna,
A lot of what gets called a condo in NYC is actually a co-op, and co-ops are a different animal. Most DSCR and investor lenders won't finance co-op shares at all, and many co-op boards don't allow buying to rent out in the first place. Check the ownership type and the sublet policy before you fall for a listing.
Real condos have their own wrinkle. For a conventional investment loan the building has to be warrantable, which looks at things like whether one owner holds too many units, pending litigation, commercial space, and the HOA's budget and reserves. Plenty of city buildings miss on one of those. A DSCR loan can usually still finance a non-warrantable condo, typically with more down and a slightly higher rate.
On your property-or-income question: conventional looks at both, DSCR looks mostly at the property. If you're self-employed and your tax returns understate what you really earn because of write-offs, bank statement loans qualify you on 12 to 24 months of deposits instead. That's useful when the rent alone doesn't quite get a DSCR loan over the line but your actual cash flow is strong.
16 Replies
- Lender · Nevada. · Member since 2026 · 15 posts · 10 votes1w
Hi Anna - 1-4 units (single fam/condo) is still a residential loan, not commercial. Commercial is 5+ units.
For a rental single fam you have 2 main options:
1. Conventional investment loan: higher rate than primary. Lender checks YOUR income/credit/DTI + 75% of market rent.
2. DSCR loan: Lender checks the PROPERTY, not your income. Does rent cover the mortgage? a bit higher but much easier to qualify. Most new investors start here.
- 1wDivin KanyamaBusiness MemberAccountant · Seattle, WA · Member since 2025 · 684 posts · 287 votes
@Anna Hamann Good news: a single-family home or condo usually isn't a commercial loan. Anything 1–4 units typically qualifies for a regular conventional loan. Commercial loans generally start at 5+ units. Investor loans do run a bit higher than owner-occupied ones. Think roughly 0.5–1% more on the rate, 15–25% down, and some cash reserves (often about 6 months of payments). Rates and terms vary, so shop around.
For a conventional loan, the lender cares mostly about you: credit, income, debt-to-income, and reserves. The property still has to appraise, and they may count some of the expected rent. If your income is limited or you already have a few properties, DSCR loans qualify you mostly on the property's rent, but expect higher rates and about 20–25% down.
Talk to a lender who works with investors before you start making offers.
- Virtual Assistant · Member since 2026 · 32 posts · 9 votes1w
Hi Anna, a single-family home doesn't have to be a commercial loan. There are options like a loan based on rent (DSCR) or a repair loan. Are you looking for funding or an investment loan, and which state are you buying in? I work with Adrean Johnson at NextDeal Capital, a loan brokerage. Feel free to message me if you'd like a free loan quote.
- 1wDiana KhanPro MemberAttorney · 10451 Mill Run Cir #755 Owings Mills, MD 21117 · Member since 2024 · 741 posts · 269 votes
Quote from @Anna Hamann:
Hello everyone,
I wanted to get more info on what loans/financing exists for investors. I understand commercial loans for multi family listings, but if it is a SingleFam, or a condo, is it also a commercial loan, and the rates are way higher, correct ? Example: if I am looking to buy a Single Fam home and rent it out, what loan do i need, and what is required from me by the lender? Do you look more into the property or my personal income and etc...? Thanks in advance!
Hi @Anna Hamann! You don't necessarily need a commercial loan to buy a single family home or condo as a rental. As Rick mentioned, conventional investment loans and DSCR loans are two options worth looking into. The requirements will depend on the lender and your financial situation.
I'm a real estate attorney and investor based in Maryland, and I work with clients on property transactions, contracts, and LLCs. One thing I encourage investors to think about early is how they plan to own the property. If you're considering buying through an LLC, I'd bring that up with the lender before moving forward, since it can affect your financing options.
I appreciate you asking this, @Anna Hamann! Financing can be confusing when you're starting out, and it's good to understand your options before buying. Happy to stay connected!
- Realtor · Memphis, Shelby County · Member since 2026 · 317 posts · 115 votes1w
Great question, and Rick covered the two big rental-loan paths well. From the agent side: if you plan to live in the property, a 1-4 unit with an FHA loan (as low as 3.5% down) is often the cheapest way into your first investment — rent out the other units while you live there. For a pure investment property you won't live in, expect 15-25% down on a conventional investment loan, with the lender reviewing your income, credit, and debts plus a share of expected rent. DSCR loans flip that: they qualify the property's rent against the payment, which helps if your personal income is the constraint. One tip: talk to a local lender before shopping so you know your numbers, and have your agent run rental comps on any property — the rent has to support the loan, whichever path you take.
- 1wRay WilliamsBusiness MemberLender · Denver, CO · Member since 2017 · 179 posts · 82 votes
Anna,
A lot of what gets called a condo in NYC is actually a co-op, and co-ops are a different animal. Most DSCR and investor lenders won't finance co-op shares at all, and many co-op boards don't allow buying to rent out in the first place. Check the ownership type and the sublet policy before you fall for a listing.
Real condos have their own wrinkle. For a conventional investment loan the building has to be warrantable, which looks at things like whether one owner holds too many units, pending litigation, commercial space, and the HOA's budget and reserves. Plenty of city buildings miss on one of those. A DSCR loan can usually still finance a non-warrantable condo, typically with more down and a slightly higher rate.
On your property-or-income question: conventional looks at both, DSCR looks mostly at the property. If you're self-employed and your tax returns understate what you really earn because of write-offs, bank statement loans qualify you on 12 to 24 months of deposits instead. That's useful when the rent alone doesn't quite get a DSCR loan over the line but your actual cash flow is strong.
- Specialist · NJ · Member since 2022 · 1k+ posts · 663 votes1w
The difference between primary mortgages and investment mortgages is that the investment mortgages are B2B loans. An LLC lends another LLC money. That's why lots of times you do not need a license to operate in the space. There is also a conventional route which can offer a long term product in your name not your LLC. All loans not in personal name are considered commercial loans.
There is two major products in this space. The bridge loan and then the 30 yr DSCR.
Bridge loans are short term loans with higher rates but interest only payments and a balloon payment at the end. These are meant for short term - transition periods - that are best kept under 9 months preferably under 6. They offer purchase money and rehab money. Usually a lower credit score is accepted because there should only be 6 - 9 payments hopefully and if your credit is really bad they will ask you to wrap 6 payments into closing so they know they are covered. The Guarantor is always looked at for credit, background, and experience.
The DSCR programs have higher credit score requirements because there are so many more payments to make. This loan will depend on the guarantor profile and the DSCR score from the numbers: RENT/PITI = DSCR. That number you wanna see 1.1 at minimum but really 1.3+. - 1wDevin PetersonBusiness MemberLender · Sarasota, FL · Member since 2022 · 2k+ posts · 683 votes
Anna, good news is a single family or condo you rent out is still a residential loan, not a commercial one. You've got two main routes.
Conventional investment loan: the lender looks mainly at you. Personal income, tax returns, debt to income, credit, plus usually 15 to 25% down and a few months of reserves. Rates run a bit higher than on a primary residence but they're usually the lowest-cost option if your income documents well. Projected rent from a lease or appraisal can help you qualify, typically counted at around 75%.
DSCR loan: the lender looks mainly at the property. They compare market rent to the full payment (principal, interest, taxes, insurance, HOA) and don't use your personal income or DTI. Expect roughly 20 to 25% down, minimum credit scores (often in the 660 to 700 range depending on the lender), reserves, and a rate that's usually somewhat higher than conventional. You can also close in an LLC, which most conventional loans won't allow.
On a condo, ask early about warrantability (owner-occupancy ratio, HOA reserves, litigation, single-entity ownership), since a non-warrantable condo can knock out conventional financing and narrow the DSCR options too.
Rule of thumb: if you have strong W-2 or documented income, price conventional first. If your tax returns show low income or you plan to scale past a few properties, DSCR is usually the better fit.
ProAlpha Capital55 Reviews - Member since 2026 · 16 posts · 4 votes1w
Hi Anna, the financing options for a single-family rental or condo can differ from those for a multifamily commercial property. Depending on the property and your investment strategy, you may qualify for a conventional investment property loan or a DSCR loan, which focuses more on the property's rental income and ability to cover the mortgage.
Lenders may also consider your credit score, down payment, existing debts, and financial profile. The best option depends on whether you're purchasing your first rental or expanding an existing portfolio.
Are you planning to purchase your first rental property, or do you already own investment properties?
- 1wErik EstradaBusiness MemberLender · Member since 2022 · 6k+ posts · 1k+ votes
Hey Anna!
Welcome to BP. There are many different kinds of loans for investors. Your traditional full-doc conventional loan requires your personal income and DTI to qualify. Rates are generally lower on these, however as of lately they have been similar to DSCR loans.
DSCR Loans are underwritten based on the property's ability to debt service the full mortgage payment, your credit score, and reserves. They are mainly for turnkey rental homes. If the property is distressed you may want to look into hard money lending.
Hard Money lenders do not look at the property's ability to repay nor your personal income to qualify. It is strictly based on the property's profitability, your credit, and sometimes your cash reserves. Rates are generally higher on these since the goal is to fix the property and sell or refi. There are very minimal documents needed to qualify, usually a soft credit report, LLC and proof of funds are more than enough to obtain financing. If the property is down to the studs or is vacant land, you may want to look into ground-up construction loans.
GUC loans require prior experience doing construction, heavy rehabs, high credit and high cash reserves. They are usually best suited for experienced investors, or early builders at minimum. There are lenders that can do GUC loans without experience, however it will need to be in a very profitable area, you should have high reserves, and a high credit score. They are very similar to fix and flip in that approval is based on the profitability of the project.
LuxePrivate Investments LLC 572 Reviews - 1wRyan BakerBusiness MemberLender · Strongsville / Cleveland, OH · Member since 2026 · 134 posts · 34 votes
Anna, for a single-family or condo rental you don't need a commercial loan. The common routes are a conventional investment property loan (usually 15 to 25% down, qualified on your personal income and debt-to-income) and a DSCR loan (qualified mainly on the property's rent covering the payment, which helps if your tax returns don't show much income). If you'd live in one unit of a 2 to 4 unit building, FHA is also an option with a much smaller down payment. Condos add a wrinkle: the lender also reviews the building itself (owner-occupancy ratio, HOA reserves, any litigation), so some condos need a non-QM loan. Beyond that, lenders mostly look at credit score, reserves (often around 6 months of payments), where the down payment comes from, and either your income or the property's rent. Happy to walk through the numbers on a quick call once you have a property in mind, my direct line and email are on my profile.
(Drafted with AI assistance.)
- Lender · Boynton Beach, FL · Member since 2026 · 217 posts · 89 votes1w
Anna - good question. For single fam rental it's usually not commercial loan.
You have 2 main options:
Conventional investment loan - 20-25% down, they look at YOUR income hard, debt to income, credit 680+, rates a bit lower but you need W2s, tax returns.
DSCR loan - this is what most of us use for single fam / condo rentals now. Lender looks at property rent vs payment, not your personal income. If rent covers payment = you qualify. Usually 20-25% down, credit 660+, no W2s needed. Rates a bit higher than conventional, like 1-2% higher right now.
If it's condo, check if condo is warrantable, some DSCR lenders are picky with condos.
For your example - buying single fam to rent - DSCR is easier if you don't want to show personal income. Conventional is cheaper rate if you have strong W2.
What market are you looking in?
- 1wConnor MaynerBusiness MemberLender · Sarasota, FL · Member since 2026 · 11 posts · 5 votes
Anna, for a rental you'd typically look at a DSCR loan, which qualifies on the property's rent instead of your personal income, with no tax returns needed. We have solutions for first-time investors and can walk you through the whole process from start to finish.
I own Ocean Coast Mortgage, a brokerage that arranges business-purpose investment loans. Let's connect and set up a quick call to find the right fit.
Connor
- Member since 2026 · 28 posts · 6 votes1w
I'm a mortgage broker, so here's the quick lay of the land. For a first rental you'll mostly see: (1) conventional investment loans, which use your W-2/tax return income, usually 15–25% down, best pricing if you qualify on paper; (2) DSCR loans, which qualify on the property's rent vs. the full payment instead of your income, usually 20–25% down, and can close in an LLC; (3) house hacking with an owner-occupied loan if you live in one unit. Lenders look at credit, reserves, the appraisal/rent schedule, and for condos the HOA budget and questionnaire. Heads-up if you're in NYC: most investor/DSCR lenders won't touch co-ops. SFRs and warrantable condos are much easier.
- Involved In Real Estate · Brooklyn, NY · Member since 2014 · 59 posts · 8 votes4d
Thank you all for your help and knowledge, I m looking forward to connecting with some of you for sure in the near future.
Join the conversationCreate a free account to reply, vote on answers and follow this thread.