Mortgage Programs for Investors

Mortgage Programs for Investors

Investors have several mortgage options available depending on their goals, financial situation, and the type of property they’re purchasing (residential, multi-family, or commercial). Here’s a breakdown of the main mortgage options available to real estate investors:

1. Conventional Loans

• Best for: Investors with good credit and a solid financial history.

• Key Features:

  • Offered by banks and traditional lenders.

  • Typically require 15 - 25% down for investment properties.

  • Fixed or adjustable interest rates.

  • Must meet Fannie Mae or Freddie Mac guidelines.

• Pros: Competitive rates, widely available.

• Cons: Strict qualification criteria; limited to a certain number of financed properties (usually 10).

2. Portfolio Loans

• Best for: Investors who don't qualify for conventional loans or want to finance multiple properties.

• Key Features:

  • Kept in-house by lenders (not sold on secondary market).

  • More flexible underwriting standards.

  • Useful for non-traditional income or credit situations.

• Pros: Flexibility in terms and borrower profile.

• Cons: Higher interest rates and fees than conventional loans.

3. Hard Money Loans

• Best for: Flippers or short-term investors needing fast financing.

• Key Features:

  • Based primarily on property value, not borrower credit.

  • Short-term (6 - 24 months).

  • High interest rates (8 - 15%) and points (1 - 5%).

• Pros: Fast approval and funding; less documentation.

• Cons: Expensive; high risk if exit strategy fails.

4. DSCR Loans (Debt Service Coverage Ratio)

• Best for: Buy-and-hold investors using rental income to qualify.

• Key Features:

  • Approval based on rental income, not personal income.

  • Commonly used by LLCs or investors with many properties.

  • DSCR = Rental Income / Debt Obligations (typically must be > 1.0).

• Pros: Easy qualification for cash-flowing properties.

• Cons: Higher interest rates than conventional loans.

5. FHA/VA Loans (Limited Use for Investors)

• FHA Loans: Can be used for multi-family (up to 4 units) if the investor lives in one unit.

• VA Loans: For eligible veterans; similar rules apply (must occupy the property).

• Pros: Low down payments, favorable terms.

• Cons: Occupancy requirement restricts investo