There are several ways to finance a rental property, and the right one depends on three questions: whose income qualifies, whose name goes on title, and how long you plan to hold. Conventional loans backed by Fannie Mae and Freddie Mac qualify on your personal income, cap the number of properties you can finance and require title in your own name. DSCR loans qualify on the property’s rent, allow an LLC, and have no property cap, at a higher rate. Hard money finances a purchase and renovation for a year or two on the strength of the asset. An FHA or VA loan on a 2 to 4 unit property gets a first-time investor in with little down, provided you live in one unit.
At Alpine Mortgage, we have financed rentals under all four structures for our clients. This article compares these different loan programs. For programs and rates, see our investment property loans and DSCR loans pages.
The Four Programs at a Glance
| Loan product | Qualifies on | Typical minimum down | Title | Best for |
| Conventional (Fannie Mae, Freddie Mac) | Your income and debts, plus 75 percent of rent | 15 percent on 1 unit; 25 percent on 2 to 4 units | Your name only | Buy and hold with strong personal income, up to 10 financed properties |
| DSCR | The property’s rent divided by its full payment | 20 to 25 percent | Your name or an LLC | LLC investors, portfolios past the 10-property cap, complex personal income |
| Hard money, fix and flip | The asset and its after-repair value | Varies by deal; sized to purchase price and renovation budget | LLC common | Purchases that need renovation; 12 to 24 month holds |
| FHA or VA on 2 to 4 units | Your income plus 75 percent of rent from the other units | 3.5 percent FHA; zero VA | Your name; you occupy one unit for at least a year | A first rental with little cash |
Conventional Investor Loans: The Rules That Set Your Price
Fannie Mae’s Eligibility Matrix (August 5, 2026) allows 85 percent loan-to-value on a 1 unit investment purchase, 75 percent on 2 to 4 units, 75 percent on a rate and term refinance, and 75 percent (1 unit) or 70 percent (2 to 4 units) on a cash-out refinance. A 30 year fixed rate is standard. What investors underestimate is the pricing. Fannie Mae’s loan-level price adjustment matrix (September 30, 2026) adds 1.125 percent of the loan amount for an investment property at 60 percent LTV or below, 1.625 percent up to 70 percent, 2.125 percent up to 75 percent, 3.375 percent up to 80 percent, and 4.125 percent above 80 percent. Those add-ons are paid as points or absorbed as a higher rate, which is why investor rates run above primary residence rates and why 25 percent down prices much better than 15 percent. Our article on why your rate is higher than advertised explains how add-ons affect your quote.
Two more rules to know. Reserves: six months of the subject property’s full payment, plus 2 percent of the unpaid balances on your other financed properties if you have one to four, 4 percent with five or six, and 6 percent with seven to ten (Selling Guide B3-4.1-01). The cap: ten financed one to four unit properties when the subject is an investment property, counting your own home. Properties financed in an LLC’s name where you are not personally obligated do not count (B2-2-03), which is a planning point for investors building past ten.
What Changed on September 2, 2026
Fannie Mae’s Announcement SEL-2026-08 rewrote the rental income rules into a new chapter, B3-3.8. Lenders may apply it now and must apply it to applications dated on or after December 1, 2026 (the date was moved from November 1 in a September 23 reissue). Three changes matter for buyers.
- The subject property. Gross rent from the appraiser’s rent schedule or a transferred lease is multiplied by 75 percent, and the full payment is subtracted. The result is adjusted net rental income. With 12 months of documented property management experience (a Schedule E showing 365 fair rental days, or a lease dated at least 12 months before the application), a positive result counts as income. With less experience, a positive result can only offset the property’s own payment. A negative result counts against your debt-to-income ratio either way (B3-3.8-02).
- The home you are leaving. A lease no longer establishes rent on a departing residence. Rent comes from an appraisal, a Form 1007, or a three-comparable market analysis, reduced by 25 percent, and can only offset that home’s payment. Borrowers with under 12 months of landlord experience need six additional months of reserves for it (National Mortgage Professional, September 22, 2026).
- Short term rentals. Validated short term rental data can support a 1 unit subject property, but the income is reduced by 50 percent rather than 25 percent.
The practical effect is that the first rental is now the hardest one to finance conventionally. Without a year of landlord history, the property has to carry itself at 75 percent of rent before any of its income helps you. That is the gap FHA multi-unit loans and DSCR loans fill.
DSCR Loans: The Property Qualifies Instead of You
A DSCR loan divides the property’s gross rent by its full payment: principal, interest, taxes, insurance, and association dues. A ratio of 1.00 means the rent covers the payment. Most lenders want 1.00 or higher; programs exist below 1.00 at lower loan-to-value and a higher rate. There is no personal income calculation, no debt-to-income ratio, and no cap on financed properties. Title can be held in an LLC with a personal guarantee, and our guide to closing a DSCR loan in an LLC covers the entity documents. Because a loan on a rental you will not occupy is business purpose credit, it sits outside the consumer ability-to-repay rules, which is also why prepayment penalties of one to five years are common; ask about the structure and any buyout before you lock. See how non-QM loans work for the legal distinction and DSCR loans for short term rentals for how lenders treat Airbnb income.
An illustration. Take a $600,000 two-family in Bergen County with 25 percent down and an assumed full payment of $3,900 a month, including New Jersey property taxes, renting at $2,300 and $2,100. The DSCR is $4,400 divided by $3,900, or 1.13, which qualifies. Under the conventional calculation, 75 percent of $4,400 is $3,300, and $3,300 minus $3,900 is a $600 monthly shortfall added to your debts, whether or not you have landlord experience. Same property, two answers. The conventional loan is still cheaper if your income absorbs the $600; the DSCR loan is the only option if it does not.
Hard Money and Fix and Flip Financing
Hard money and rehab loans are priced on the asset: the purchase price, the renovation budget, and the after-repair value. Terms run 12 to 24 months, payments are usually interest only, and points are paid at closing. The trade is speed and tolerance for condition: a property that cannot pass an appraisal for a conventional or DSCR loan can close with hard money, be renovated, and then be refinanced. Plan the exit before you close. If you keep the property, a DSCR refinance is the usual path, and most DSCR lenders want three to six months of seasoning after the renovation. If you paid cash with no financing at all, Fannie Mae’s delayed financing exception allows a cash-out refinance within six months of purchase for up to your documented investment plus closing costs, subject to the 75 percent (1 unit) or 70 percent (2 to 4 units) limits (B2-1.3-03); otherwise a conventional cash-out requires six months on title.
Your First Rental as a Primary Residence
An FHA loan allows 3.5 percent down on a 2 to 4 unit property if you occupy one unit for at least a year, and 75 percent of the rent from the other units counts toward qualifying. Three and four unit FHA purchases must also pass HUD’s self-sufficiency test: 75 percent of the appraiser’s market rent for all units has to cover the full payment, including mortgage insurance. In high-tax parts of New Jersey and New York that test fails more often than buyers expect, so run it before you write an offer. A VA loan allows zero down on 2 to 4 units with the same occupancy requirement. After the year, you can move and keep the property; the departing residence rules above then apply to your next purchase.
The Investor Market in 2026
Investors bought 19 percent of homes sold in the first quarter of 2026, down from 20 percent a year earlier, and their purchases fell 6 percent to the lowest level since 2020, with Orlando down 25 percent (Redfin, May 28, 2026). Rates in the low 6 percent range, rising prices, and higher insurance and tax costs have thinned the margins. For a buyer who can still make the numbers work, that means less cash competition and more negotiating room, and it means the financing decision matters more than it did when appreciation covered mistakes.
Sources
- Fannie Mae Eligibility Matrix, August 5, 2026. singlefamily.fanniemae.com
- Fannie Mae Loan-Level Price Adjustment Matrix, September 30, 2026. singlefamily.fanniemae.com
- Fannie Mae Selling Guide B3-4.1-01 (reserves), B2-2-03 (multiple financed properties), B2-1.3-03 (cash-out and delayed financing), B3-3.8-02 (rental income from the subject property). selling-guide.fanniemae.com
- Fannie Mae Announcement SEL-2026-08, September 2, 2026, reissued September 23, 2026. singlefamily.fanniemae.com
- National Mortgage Professional, Fannie Changes How Rent From A Former Home Counts, September 22, 2026. nationalmortgageprofessional.com
- HUD Single Family Housing Policy Handbook 4000.1 (FHA 2 to 4 unit occupancy and self-sufficiency test).
- Redfin, Investor Home Purchases Fall to Lowest Level Since 2020, May 28, 2026. redfin.com
