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Investment Property Loans

What is a Residential Investment Property Loan?

A residential investment property loan is a mortgage for the purchase of an income-producing property. That includes buying properties to generate rental income or to renovate and sell for a profit (more commonly known as house flipping).

There are also short-term hard money investor loans, allowing you to buy properties you plan to repair and sell quickly.

A true investment property loan assumes you won’t be living in the property you purchase and will rent it out to tenants to earn rental income. You may also use some standard loan programs to purchase multifamily investment homes, as long as you plan to live in one of the units.

Is an Investment Property Loan right for you?

If you are considering buying an investment property, it is important to speak with one of our loan specialists to see if you are eligible and to compare the benefits and drawbacks of this type of loan against other types of loans.

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Investment Property Loan Options

There are several programs to choose from when you’re purchasing investment homes.

Conventional Loan

The only standard loan program that allows you to buy an investment property with no strings attached is the conventional loan program.

FHA Loan

You can buy a two- to four-unit home with a mortgage backed by the Federal Housing Administration (FHA) and collect rent on the other units to qualify, as long as you live in one of the units for at least 12 months.

VA Joint Loan

This VA multifamily loan program is exclusively for eligible military borrowers. It allows them to buy a property with up to seven units, as long as they live in one of the units. The U.S. Department of Veterans Affairs (VA) guarantees these loans with no down payment requirement.

Non-QM Loan

Borrowers that don’t qualify for any of the programs above may be eligible for a non-qualified mortgage (non-QM) loan based exclusively on the rental income received on the home they’re buying. The down payment requirement and interest rates are higher than with regular loan programs.

Home Equity Loan

If you currently own a home with a good chunk of equity, you can borrow against the equity with a home equity loan or a home equity line of credit (HELOC). With home equity loans and HELOCs, you borrow a portion of your equity and leave your current mortgage loan in place. A home equity loan is paid in a lump sum with a fixed rate, while a HELOC works more like a credit card that you can use and pay off for a set time.

Cash-out Refinance

A cash-out refinance is when you take out a mortgage for more than you owe and pocket the difference in cash, which can be used to purchase an investment property.

Hard Money Loan

These loans are more common for flipping investors — hard money investors are willing to lend you money knowing you’ll pay it off quickly. However, you’ll often need at least a 25% down payment and will pay high rates and upfront points. And it’s not uncommon for there to be a prepayment penalty.

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