Investment Property Loans: Financing With 10% Down | Nav

real estate of the realm invest can feel like an stimulate adventure. When you take your time and find the right investment property, the investing might help you improve your monthly cash flow and generate supernumerary income. Finding the good investment property loanword can make all the deviation in whether or not your investment place is profitable—or a fiscal burden .
high gear down payment requirements send many investors searching for more low-cost ways to secure financing. And while lower down payment options on rental property loans can surely be complicated, there are option solutions you might want to consider .

What is an Investment Property Loan?

barely like you can take out a mortgage to buy a dwelling for yourself, you can do the like if you plan to invest in property. possibly you want to buy a couple of apartment buildings so you have gross generated from the rents each month, but need fiscal aid to do so. That ’ randomness where an investment property loan comes in .
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How Investment Property Loans Work

like to the room a personal mortgage works, an investment property loanword provides the funds you need to purchase a house, multifamily place, commercial property, or country. You are expected to put down a share of the sale price ( more on that in the next section ) .
The property you ’ rhenium buy acts as collateral for the loan. If you ’ re ineffective to pay the loanword in full, the lender has the right to seize the property to sell and cover your debt .

How Much Do You Need to Put Down on an Investment Property?

Qualifying for investment property financing can be more challenging than you might expect, specially if you ’ re a modern property investor. many first-time real estate of the realm investors are surprised to learn that a 20 % gloomy payment on a rental property loanword is considered normal .
A 20 % down payment can be a goodly measure, depending upon the purchase price of the property. Imagine you want to buy a $ 500,000 multifamily dwelling. If the lender requires 20 % down, you ’ d motivation to come up with $ 100,000 in cash to seal the conduct .

Can I Find an Investment Property Loan with 10% Down?

A ample down requital is standard when you take out investment place loans. But you may be able to buy an investment place with ampere small as 10 %, 3.5 %, or even 0 % down .
lend programs like HomeReady and Home Possible make purchasing an investment property with 10 % down or less a possibility. To qualify, you ’ ll want to satisfy a lender ’ s approval criteria. In addition to more rigorous credit seduce and cash reserve requirements, you may need to do the watch :

  • Become an owner-occupant and move into the place for a minimum of one class .
  • Show proof of income high enough to qualify for the lend, but below the local anesthetic median income .

Either lend may work for owner-occupied investment properties. But they ’ ll besides appear on your personal credit rating reports with Equifax, TransUnion, and Experian. The mortgage could impact your recognition for the good or for the bad, based upon whether or not you make all periodic payments in a timely manner .
Let ’ s prima donna deep into these two programs .

Fannie Mae’s HomeReady Loan Program

One option that can work well for buyers looking to purchase a base with a smaller polish payment is Fannie Mae ’ s HomeReady Loan Program. Qualified buyers may be able to secure a fixed-rate mortgage rate for american samoa little as 3 % down .
This mortgage loanword program is designed to help moderate- to low-income borrowers with adequate credit become homeowners. The HomeReady loan program may work well for owner-occupants who wish to rent out a helping of their home ( or a multi-home whole ) to help cover the cost of house .
here ’ s why the HomeReady broadcast can be helpful to owner-occupant investors. The program lets borrowers include income from “ accessory units and borders ” for qualification purposes. Don ’ thymine earn enough income to satisfy the lender ’ s debt-to-income proportion requirements ? The economic rent money you ’ ll roll up on the property might help you qualify .
You ’ ll need to supply acceptable documentation for rental income to count on your loan application. Lenders may accept a rent or a Fannie Mae Single-Family Comparable Rent Schedule from the property appraiser as proof of the income source .

Freddie Mac’s Home Possible Loan Program

Freddie Mac ’ s Home Possible Mortgage offers low- and moderate-income borrowers the opportunity to purchase a home with angstrom small as 3 % down. If you wish to use the plan to finance an investment property, you ’ ll need to live in the home ( or at least a dowry of a multi-unit property ) .
Again, your lender may be able to count lease income while calculating your debt-to-income ratio. But the rental income will need to satisfy Freddie Mac guidelines. For case, you ’ ll need to prove that your tenant has lived with you for at least a year and plans to continue residing at the new mansion .
evening with a lower accredit score, you may be able to qualify for a mortgage lend through the Home Possible program. But you may need to provide a larger down requital of 5 % in this situation .

What are the Most Common Investment Property Loans?

Being an owner-occupant can be an low-cost way to become a veridical estate investor—especially in urban areas and parts of the state where the cost of homeownership is senior high school. rather of trying to come up with 20 % toss off, you may be able to purchase a property for much less out of air pocket .
yet be aware that when you provide a smaller down payment, the lender may require you to pay for mortgage insurance on your loan. This add fee can offset some of the potential savings you might secure with a lower pastime pace .
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Below are several small commercial enterprise loans and programs specifically for investment properties that may help you save money if you ’ re interest in the owner-occupant path .

FHA Loan

One of your loanword options is an FHA mortgage, which the Federal Housing Administration insures. Because the government backs the loanword, FHA-approved lenders may be volition to lend money ( or extend lower matter to rates ) to borrowers normally considered higher gamble. even with income limitations or credit challenges, there ’ south a probability a lender could approve your application .
One of the best perk up of qualifying for an FHA lend is the humble 3.5 % down payment. Interest rates on FHA loans are often more low-cost adenine well .
You can use an FHA loanword to purchase a home with up to four units, vitamin a retentive as you plan to live in the place personally. But there are limits on the sum you can borrow, based on the location of the property .

VA Loan

A VA loanword is another mortgage that ’ second insured by the politics. If you qualify for a VA mortgage, you may be able to purchase up to a four-unit property with no down payment .
only eligible borrowers can take advantage of VA loan benefits, including :

  • Active-Duty Service Members
  • honorably Discharged Veterans
  • Qualifying Members of the National Guard or Reservists
  • eligible Surviving Spouses

Like FHA loans, you ’ ll need to live in at least one of the units yourself if you want to use VA finance to purchase a rental property. But after a year, you might be able to take out a raw VA lend on another property and repeat the march. note : You ’ ll generally need enough remaining entitlement to be approved for another VA lend .


A USDA lend is a government-backed mortgage with no down payment necessity. The low-interest, fixed-rate mortgage loans help low- and moderate-income borrowers finance “ safe and sanitary dwellings ” in rural areas. If you qualify, you can use a USDA loanword to purchase single-family or multi-family house .
To qualify for a lend, you ’ ll necessitate to satisfy a lender ’ second requirements, including the postdate :

  • You must be a U.S. citizen or a permanent resident with a green Card .
  • The property must be in an eligible rural area, per the department of agriculture .
  • You must live in the home .

Conventional Mortgage

A conventional lender can besides offer a lend that can be used to purchase investment properties—multi-family units or otherwise. But the down payment requirements for investment loans are broadly higher with a conventional loanword .
If you plan to be an owner-occupant, you ’ ll frequently meet less rigorous loan approval standard. Down payments on owner-occupied homes can be a low as 5 % to 10 % with conventional mortgages .
It ’ south besides worth noting that you may save money on interest fees if you plan to make your lease property your primary coil residence. mortgage rates can normally be .5 % to .875 % lower in this scenario compared with an investment place mortgage rate .

FHA 203k Rehab Loans

Do you want to purchase an investing property that needs repairs ? If so, FHA 203k mortgage policy could be a helpful finance solution. The government-backed mortgage gives you the means to purchase a property and covers the monetary value of repairs with a single loan .
Like traditional FHA loans, you may be able to get a fixed-rate lend with a down payment angstrom low as 3.5 %. But you ’ ll need to live in the home plate if you plan to use this scheme for a rental property buy. For example, if you want to buy a multi-family property and reside in one unit while renting out the others, the lend might work for you .

NACA Loans

NACA stands for Neighborhood Assistance Corporation of America. It ’ s a nonprofit program that aims to promote low-cost home ownership in urban and rural areas throughout the U.S .
Through the NACA mortgage broadcast, qualified borrowers can enjoy benefits like zero down payment costs, no close costs, and no fees of any kind. pastime rates are competitive, and your credit history doesn ’ metric ton motivation to be arrant to qualify .
You can take out a NACA loanword for single-family homes and multi-family properties. But you must make the home ( or at least one of the units ) your chief residence to use a NACA mortgage for an investment property. You ’ ll besides need to both take and host classes to satisfy NACA plan requirements .

Down Payment Assistance Programs

When you plan to live in the property that you ’ ll besides be renting to others, you may qualify for down payment aid. Down payment aid programs can make purchasing more attainable when you don ’ t have a lump sum of cash stashed away .
Whether down payment aid programs are available primarily depends upon the type of loanword you ’ re using to purchase your owner-occupied lease. Your state may besides have down payment aid programs to help its residents as well .
Want to review home loan and down payment aid programs available in your express ? The U.S. Department of Housing and Urban Development provides resources to help you start the search .

Are There SBA Loans for Investment Property?

If you ’ re companion with the low-interest small commercial enterprise loans offered by the Small Business Administration, you might wonder if you can use them for investment property. In fact, you can. The SBA ’ s 504 loan course of study can be used to buy property or land, deoxyadenosine monophosphate well as cover improvements and renovations for commercial real estate of the realm .

Additional Ways to Buy an Investment Property with 10% Down

aside from the owner-occupant options detailed above, there are other ways to secure a lower-cost investment property loan. Some methods below are out-of-the-box approaches. Others may represent an increase degree of risk. Be sure to research any of the options below cautiously before you commit .

House Hacking

The term “ firm hacking ” describes a very estate investment strategy often used with multi-family homes. You ( the investor ) live in one unit of the property, and you lease out the early units to tenants .
The rend your tenants pay helps cover the price of your mortgage. Best of all, you might be able to put american samoa short as 3.5 % down ( possibly 0 % down with a VA loan ) to secure a fixed-rate mortgage using this approach .

BRRRR Method

BRRRR stands for Buy, Rehab, Rent, Refinance, Repeat. The term describes a scheme sign of the zodiac flippers frequently use to grow their actual estate of the realm investing portfolios.

step one is saving up money to buy an low-cost rental property—perhaps a foreclosure or a home in indigence of repairs. Next, rehabilitate the home strategically—focusing on repairs or upgrades that add the most respect. Once the house is quick, you can vet potential tenants and rent it out. This guide, with 11 steps on how to become a landlord, may help you complete the first three steps of the BRRRR process .
once you ’ ve rented out the family for at least 6-12 months, you may qualify for a cash-out refinance on your property. From there, you can take the equity you borrowed against for the new mortgage and repeat the action .

Hard Money

Hard money loans offer an alternative way for real estate investors to borrow money. The finance ( often short-run bridge loans ) is by and large not provided by banks, but by private lenders or individual investors .
A difficult money bridge lend broadly features higher rates and fees than traditional finance. They can besides be hazardous and, sometimes, marauding. Be certain to vet a likely hard money lender cautiously and review contracts in contingent before you commit .

Private Money

Although it ’ sulfur unusual, you could consider borrowing money from secret, affluent individuals you know personally. This strategy requires approaching family or friends to ask for a loanword or investment partner .
The down requital size on such a loanword can vary wide from one experience to the future. It all depends on the individual you ’ re ask and what he or she wants to require .
There ’ mho besides an add risk with this type of secret money loan—the gamble of damaging a personal relationship. Make surely to count this price carefully upfront. If something goes wrong and you can ’ triiodothyronine requite as harmonize, you could create a nerve-racking site .
private money lenders may besides offer short-run loans you can use for investment property purchases. however, this character of finance generally falls under the category of “ hard money ” and is likely to feature higher interest rates and fees .

Off-Market Properties

An off-market property is one that isn ’ thymine publicly advertised on the Multiple Listing Service ( MLS ) or alike on-line portals. sometimes, it ’ s a property that ’ s for sale by owner or one that the owner hasn ’ t even decided to sell yet. Sellers may choose to sell off-market to generate intrigue and, hopefully, demand a higher sales price .
real estate investors may besides sell off-market properties wholesale. These properties may be purchased with no down payment, but they ’ re much bully to find and need to sell cursorily when they become available .

Having a Real Estate License

Becoming a accredited realtor may give you an edge as a real estate investor. This approach won ’ thyroxine directly save you money on down payments. But it might offer you the find to score better property deals and save on the cost of agent commissions .
Having a real estate license besides gives you access to the MLS. You can use this instrument to search for properties and check comps of recently sold homes in the same sphere. Being a accredited veridical estate agent besides gives you more operate over the batch and early perks .
But, getting your license requires an investment—both of your money and your time. generally, it takes around 100 hours of studying, coursework, and exams to qualify for your license. once you get your license, you ’ ll want to work under a broker ( who will require fees ) plus arrant continuing education classes every year .

Turnkey Rentals and Move-In Ready

There are two terms you may come across as you search for rental homes : prison guard rentals and move-in quick. The mind behind both terms is that the investment property won ’ triiodothyronine require renovation or repairs before it ’ south quick for tenants .
Some prison guard providers offer financing for a little as 5 % down. But these loans generally feature high matter to rates .
Buying a rental property that you may be able to start earning money from immediately can seem appealing. however, seasoned investors warn these types of investments aren ’ thyroxine constantly what they seem .
rather of properties being in good stipulate for tenants, sellers of move-in fix or prison guard rentals may skip repairs they don ’ triiodothyronine deem substantive. The leave may be more frequent tenant turnover and a host of other likely problems .

Line of Credit

Do you need help coming up with a down payment for a rental place lend ? You might be able to borrow those funds using a tune of credit .
If you own another place, you might be able to secure a line of credit with the fairness in that home. Loans secured with the fairness in your primary mansion are known as HELOCs or home equity lines of citation. Loans secured with the equity you have in an investing property are known as single place investment lines of credit .
The total security of pledging an asset to the lender as collateral may help you secure a lower interest rate. Yet although they can be a cheaper room to borrow, lines of recognition ( particularly HELOCs ) come with added risk. If something goes wrong and you can ’ thyroxine keep up with your monthly mortgage payment, the bank or credit marriage might foreclose on the property you pledged as collateral when you took out the loanword .

Seller Financing

When you make payments directly to the property owner rather of financing your purchase through a lender, standard mortgage rules don ’ thymine enforce. This type of placement is known as seller financing, and it ’ south rare .
Sellers don ’ t have minimum down payment requirements they ’ ra required to follow. Rather, sellers decide for themselves the amount they ’ re comfortable accepting. Interest rates on seller financing agreements tend to be on the high side, but you might be able to negotiate a lower down requital in exchange. It all depends on what that seller feels is fair .


Whether you want to refinance an investment property or your primary mortgage, you may be able to tap into the fairness you ’ ve built up in another property. This is known as a cash-out refinance .
If you qualify for a cash-out refinance, you may be able to access a significant parcel of your place ’ randomness prize. For non-owner concern homes, your loan-to-value proportion could be deoxyadenosine monophosphate high as 75 %, depending upon the lender and respective factors .
however, a cash-out refinance can be hazardous. If something goes wrong and you can ’ metric ton afford to maintain your monthly payments, you ’ re risking the property you borrowed against when you took out the loan .

Credit Cards

technically, you may be able to use a cash promote from a credit wag ( or multiple credit cards ) to purchase an investment place .
Credit card interest rates will be higher than early types of investment property loans or bank loans. Your credit scores could besides suffer if your citation reports show a high balance-to-limit ratio on your personal credit card account ( s ) .
An option to using your personal recognition cards, business credit cards can help you build clientele credit—as well as an easily accessible beginning of borrowed das kapital. You can keep an eye on yours for absolve with Nav .

Self-Directed IRA

IRAs can offer you tax advantages adenine long as you follow IRS rules .
With a autonomous IRA, you have the option to make investments beyond typical stocks, bonds, and reciprocal funds. These alternative investments might include cute metals, businesses, and very estate .
To use this method acting, start by opening an IRA with a custodian that services autonomous accounts. alternatively, you can open a checkbook IRA history and manage the investing, record-keeping, and IRS coverage requirements yourself. Either way, you need to learn the rules and understand the risks if you plan to use this approach to invest in real estate of the realm .


A 401 ( kilobyte ) can besides be a tax-friendly way to save for retirement. Often, you can ’ thymine endow in real estate immediately from your 401 ( k ) account. You can, however, roll over your 401 ( potassium ) —tax-free—into a autonomous IRA account. After the rollover, you can use the funds to invest in substantial estate, including commercial real estate .
But cashing out a large assign of your 401 ( kelvin ) for a real number estate of the realm investment opportunity is a hazard. You could lose the money you invested if things go improper. You may besides be national to taxes and an early withdrawal penalty if you can ’ triiodothyronine repay your 401 ( potassium ) loan .

Subject to Loans

When you take on a “ subject to ” loanword, it means you ’ re taking over mortgage payments on the seller ’ s existing loanword. The property you ’ ra buying is capable to the lend that ’ randomness already in place. But you ’ re not assuming the loan itself .
There may be a difference between the sum purchase price the seller is asking and the lend sum. In this case, you ’ ll need to pay the seller the remainder in cash, take out extra finance, or negotiate a seller finance agreement .
In some ways, a “ subject to ” loanword represents less risk to you. If the place goes into foreclosure, for example, your personal accredit could escape undamaged. On the other hand, if the bank learns that you made an arrangement without its permission, it might call the lend due. At that luff, you ’ d either need to find interchange financing or risk losing any funds you invested in the property .

What it Takes to Qualify for an Investment Property Loan

If you ’ re considering an investment property loan, see what the lender you plan to work with requires in terms of eligibility .
probable, both your personal and clientele credit scores will be considered to determine your creditworthiness, vitamin a well as your debt-to-income ratio. How long you ’ ve been in business may besides matter to mortgage lenders .

Is it Harder to Get a Mortgage for an Investment Property than a Home?

Your home buy know may be limited to the homes you ’ ve taken a mortgage on to live in, and you ’ re wondering if you ’ d even qualify for an investment property loanword .
merely like with personal mortgages, you ’ ll need good credit to qualify for the best rates. But even if you don ’ t have great credit, there will be finance options for you .
If you ’ re new to investment properties, be sure to consider what your monthly refund cost will be and make sure you can afford it. If you ’ re trying to flip a home, you ’ re not guaranteed to sell it before that payment comes ascribable, thus if you can ’ t cover it, you risk foreclosing on the property .

How to Apply for an Investment Property Loan

It may take time to fill out your lotion, so gather any necessitate information and paperwork ahead of fourth dimension. You may need to provide tax returns and fiscal statements equally well as information about your business .
once you ’ re approved, you ’ ll be given a loanword agreement that lists loanword terms, including your mortgage rate. If you approve, sign the documents and the funds should be deposited into your deposit bill .

What to Consider Before Buying an Investment Property

All loan offers are not created peer, so be indisputable to shop around, since you might find a better rate and terms elsewhere .
besides, be mindful of all fees that go into your investment property loan, as you may have origin and/or administrative fees .
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Bottom Line

It ’ s not impossible to get an investment place loan with just 10 % down. It is, however, complicated. You may need to accept extra risk or trouble if you want to avoid the traditional 20 % ( or higher ) down requital broadly required for non-owner occupied investment loans .
Of course, if the options above sound besides inconvenient or excessively bad, that ’ s okay. You may be better off searching for a rental property lend through a more traditional road. It may take more time to save a big down payment, but doing so could help you secure finance that makes you more comfortable .
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This article was originally written on November 21, 2019 and updated on June 2, 2022 .

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