Can I Buy an Investment Property with a Conventional Loan?

Conventional loans are one of the most effective tools for building a real estate investment portfolio. Here is what you need to qualify, how rental income helps, and what changes when buying an investment property versus a primary residence.

Down payment requirements

• 1-unit investment property: Minimum 15% down. In practice, 20–25% is common to avoid high PMI costs and optimize pricing.
• 2–4 unit investment property: Minimum 25% down.

Gift funds are not permitted for investment property down payments — all funds must come from the borrower’s own eligible assets.

Reserve requirements

Investment properties require 6 months of PITI (principal, interest, taxes, and insurance) in reserves for the subject property. If you own other financed investment properties, additional reserves are required for each. Reserves must be liquid or near-liquid — retirement accounts count at a discounted rate.

Using rental income to qualify

Rental income from the investment property can help offset the payment for qualifying purposes. Lenders typically apply 75% of the gross rental income to account for vacancy and expenses. For a purchase with no existing lease, the appraiser’s market rent analysis can be used with the same 75% factor.

Maximum financed properties

Fannie Mae and Freddie Mac allow up to 10 conventionally financed properties simultaneously, including your primary residence. At 7 or more, the minimum credit score increases to 720 and additional reserve documentation is required. Beyond 10 properties, portfolio or DSCR financing becomes the typical alternative.

Pricing on investment properties

Investment property loans carry additional loan-level price adjustments (LLPAs) beyond primary residence rates. Expect the rate on an investment property to be 0.5%–1.0% higher than a comparable primary residence loan, depending on your specific profile.