A rental property loan is investment property financing used to buy or refinance a property you plan to rent out. Unlike a primary mortgage, approval fundamentally hinges on the property's ability to cover its debt service obligation with rental income, making the asset the primary focus of underwriting.

Rental property loans support almost every common long term investment strategy in residential real estate, from long-term rental purchases, the BRRRR strategy, and short-term vacation rentals. 

Lenders anchor their approval decision on four basic criteria: credit profile, down payment, cash reserves/liquid assets, and the projected income the property can reliably produce.

Since you won’t be living in the home as an investor, there are some important differences between rental property loan requirements and traditional mortgages.

In this guide, we’ll break down everything you need to know about getting a loan for a rental property, including:

• What Are The Rental Property Loan Options?
• How To Qualify For a Rental Property Loan?
• Which Loan Type Fits In Each Scenario?
• Current Rental Property Loan Interest Rates? [Q4 2025]
• Real Rental Property Loan Examples
• Steps For Getting Pre-Approved

If you want the clearest, lender-accurate breakdown of how rental property loans work, this is the best place to start.

Types of Rental Property Loans

Real estate investors can choose from a variety of different loan options when buying or refinancing a rental property. Each loan type solves a different problem for an investor, so your needs/goals determine which kind of financing you should use. Additionally, each loan type has a different interest rate range, leverage-to-value (LTV) requirement, closing time, and special features. This means that understanding the strengths of each option is necessary before selecting the financing option for your situation.

Other Important DSCR Loan Variations

DSCR loans are the prevailing choice for rental property financing because they are underwritten using property income rather than personal tax returns. But depending on your investment strategy and asset type, several variations of DSCR loans exist that are important to understand:

Short-Term Rental (STR) DSCR Loans

Short term rental loans are designed specifically for Airbnb and other vacation rentals, where income fluctuates seasonally. Instead of using long-term market rents, lenders underwrite based on projected nightly rates using AirDNA based revenue estimates or historical booking data. This provides far higher qualifying income for most properties that perform well as short-term rentals.

Multifamily or Mixed-Use DSCR Loans

For 5+ unit buildings or mixed-use properties, DSCR guidelines adjust to account for commercial-style underwriting. Lenders typically review rent rolls, trailing 12-month financials, operating expenses, have lower LTV requirements, and higher interest rates. These loans allow investors to scale into larger assets without navigating full commercial real estate loan requirements.

Blanket DSCR Loans

Blanket DSCR loans allow you to combine multiple properties under one mortgage, one payment, and (in many cases) one closing. They're ideal for portfolio investors who want to simplify management, avoid dozens of individual loans, or minimize closing costs when financing multiple properties.

Government-Backed Loans (FHA and VA)

Government-backed loans aren’t typically used for no-owner occupied rentals, but they’re powerful tools for investors who want to house hack or enter the market with lower upfront costs.

• FHA and VA loans can finance 1-4 unit properties as long as you live in one unit for the required occupancy period.
• FHA loans go as low as 3.5% down with a 580+ credit score, making them the easiest path into small multifamily (up to four units).
• FHA also has multifamily options for 5+ units, though the underwriting is more complex.
• VA loans are limited to eligible service members, veterans, and qualifying surviving spouses and offer 0% down when you occupy one unit.

It is important to mention that FHA/VA loans are for owner-occupied properties only. Most investment property lenders strictly prohibit owner occupancy and do not offer FHA or VA loans. If you’re interested in this loan type, you’ll have to contact a FHA or VA specialized lender.

How to Qualify for a Rental Property Loan

Getting approved for a rental property loan requires 3 fundamental things: 

1. Demonstrating the ability to repay the loan with rental property income,
2. Meeting the minimum credit requirements, 
3. Having the cash or liquid assets to cover the liquidity requirements for the loan.

Standard requirements for rental property financing are consistent across the lending industry, with small variations based on loan type, asset type, and lender. 

Here is a detailed overview of the industry-wide rental property loan requirements:

Minimum Underwriting Requirements

• Credit Score: Most lenders require a minimum score of 660-680 to qualify. High FICO isn't required, however having a higher FICO will bring down your interest rate and increase your LTV (%).
• Down Payment: Down payments for most rental property loans is 20%. Some conventional loans can offer 15% down with a partial income based underwriting, while DSCR loans require a 20% down payment.
• Reserves: In order to close on a rental property you will need cash savings or liquid assets to cover a 20% down payment, 2%-5% of closing costs, and an additional 6 Months of PITIA to cover the liquidity requirements for a rental property loan.
• Property Condition: The property must be “rent-ready”. This means major property damage, deferred maintenance or unfinished rehab is not prohibited. The property condition is formalized by an appraisal which confirms the property value, fair market rents, and a property condition rating of C1 to C6 (A property condition of C4 is minimally required for rental property loans).

Required Documents

Rental property loan documentation varies based on the type of loan you select. The two most popular loan types for rental properties are DSCR loans and conventional loans. Below is a checklist of the documents required for each loan type:

• Conventional Loans: Require full income documentation and are far more document intensive than other loan types. The docs needed include:

• DSCR Loans: DSCR loans are far less document intensive than conventional loans. We have created a full DSCR Loan Requirements Checklist, but we’ll provide the brief overview below:

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Step-by-Step Rental Property Loan Qualification Process

The path to getting approved for a rental property loan is quite straightforward. The steps are outlined below:

1. Investment Analysis: The biggest mistake that first time rental property investors make is not completing an investment analysis. In order to complete this analysis, you need to check if the property will have “cash flow” as a rental. You can use our DSCR Calculator to make sure the debt-service coverage ratio of the property you plan to finance is expected to be greater than 1.0.
2. Pre-Approval: Once you have a property lined up with a DSCR > 1.0, you can apply for a pre-approval. In this step, we will review the property, run a soft credit check, and confirm that you have the cash to close (if needed). Most pre-approvals happen the “same-day” or within 24 hours.
3. Loan Processing: Once you have your rental property “under contract”, the loan will be moved into processing. In this stage, you will upload all required documentation for the chosen loan program and the lender will order an appraisal. This process typically takes 7 days for DSCR Loans.
4. Underwriting Review: Once the appraisal is received and all required documents are collected, the loan is submitted for underwriting review. This is a 48 hour process where the lender’s underwriting team double checks your document and formally approves the loan for closing.
5. Clear-to-Close: Once all conditions are cleared, the lender issues the clear-to-close, the signing occurs within 48 hours. 

Current Rental Property Loan Rates [Q4 2025]

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Factors Affecting Rental Loan Rates

Rental property loan rates shift based on five core variables:

1. DSCR ratio: Stronger cash flow results in a lower rate. A DSCR ratio of 1.2 or higher will qualify for the best pricing.
2. LTV: More equity means lower risk for the lender, resulting in better pricing. Rates improve with every 5% of leverage (ie. 80%, 75%, 70%, 65%. etc)
3. Credit Score: Rental property loan rates improve in tiers of 20 FICO points. A score of 760+ will qualify for the lowest rate.
4. Property Type: Single-family rentals have slightly lower rates than multifamily or short term rental, which are subject to higher vacancy.
5. US Treasury Yields: The U.S. mortgage market is indexed against the US Treasury market which serves as a benchmark or base rate for mortgage rates. As the treasury yields fluctuate, mortgage rates fluctuate synchronously.

Rental property loans almost always carry marginally higher interest rates than primary mortgages because the loans are priced without any personal income verification.

How to Choose the Best Rental Loan for Your Scenario

Different investment strategies require different loan options to maximize success. Below is an overview of the best financing options for the most common investment strategies:

• For Long-Term Rentals: Prioritize fixed-rate mortgage options where monthly payments are easy to predict. Choose a DSCR loan for long term cashflow investments, or conventional loans for long term investments where rental income doesn’t cover debt service.
• For BRRRR Investors: Use a Hard Money fix and flip loan to purchase and repair the property, then use a DSCR Refinance loan (once the property is rented) to lower your monthly payment and pull cashout.
• For Airbnb and STR Investors: Use a STR-focused DSCR loan program that uses the AirDNA projected short term rental income in the DSCR calculation instead of the appraised long term market rents.

Pros and Cons of Rental Property Loans

Rental loans offer strong long-term upside, but the trade-offs reflect the higher risk lenders take on investment properties.

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Rental Property Loan Case Study (Real Example)

The case study below is an example of a real rental property loan (DSCR loan in Alabama) that Ridge Street Capital provided to a first time real estate investor in Q4 of 2025.

Rental Property Loan Overview:

Borrower Experience	0
Borrower Credit Score	764
Property Purchase Price	$305,000
Loan Amount	$244,000 (80%)
Interest Rate	6.70%
Origination Fee	0%
Monthly P&I Payment	$1,574.84
DSCR Ratio	1.27 ✔️
Days to Close	24 Days

Borrower Experience 0

Borrower Credit Score 764

Property Purchase Price $305,000

Loan Amount $244,000 (80%)

Interest Rate 6.70%

Origination Fee 0%

Monthly P&I Payment $1,574.84

DSCR Ratio 1.27 ✔️

Days to Close 24 Days

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Final Takeaway: The Right Financing Builds the Right Portfolio

Qualifying for a rental property loan becomes straightforward once you understand how lenders evaluate these loans. No matter the loan type, approvals come down to the same fundamentals: your credit profile, your down payment, your cash reserves, and the property’s ability to cash flow.

If you’re ready to evaluate a possible rental property investment, compare financing options or to get pre-approve, Ridge Street Capital can help answer your questions and pre-approve you for a DSCR loan.

To get started, you have 3 options: Request A Quote, Submit a Pre-Approval Application, or Schedule A Call with an expert. 

Rental Loan FAQs

Is it hard to get a rental property loan?

It's not difficult to get a rental property loan if you meet the core loan requirements: minimum credit score, adequate cash reserves, and a property with projected positive cashflow. Lenders want to see that the monthly mortgage payments are fully supported by the asset, not your W-2. Most denials stem from weak credit or a deal where the property value and rent don’t justify the mortgage loan amount. When the investment fundamentals are acceptable, approvals move quickly even for first time investors.

Do rental loans require Personal Mortgage Insurance (PMI)?

No. If you use a DSCR loan, PMI isn’t used because the loan is a “business purpose” loan not a personal mortgage. Lenders manage this higher risk with down payment requirements, rate adjustments, and credit score requirements.

How many rental loans can I have?

Conventional loans following Fannie Mae guidelines cap the number of financed properties, but investor-focused loan options (DSCR loan or hard money loans) don’t have hard limits. As long as your credit, reserves, and experience support the investment, you can keep acquiring properties.

What are some common reasons for denial of a rental loan?

Denials are highly predictable: insufficient reserves, weak credit score, a property that fails the rent-ready appraisal, or a low DSCR (for DSCR loans) or high DTI (for conventional loans).

What’s better, DSCR or conventional?

It depends on the strategy. DSCR loans win when you want the approval tied strictly to cash flow, when you’re buying through an LLC, or when you’re scaling a rental portfolio. Many investors use DSCR because of acquisition speed and marginally higher interest rates than conventional loans.