Financing a rental is not financing a home you will live in, and the sooner you accept that, the smoother the whole process goes. Lenders see more risk in an investment property, so they ask for more down, more reserves, and more proof that the rent is real. Here is exactly what that looks like, and how to show up ready to close.
Quick Answer
Rental properties are usually financed with conventional investor loans or DSCR loans, with larger down payments and higher rates than owner-occupied mortgages.
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What financing do I need for a rental property?
Financing a rental property is different from financing a home you will live in, because the lender sees more risk and fewer consumer protections apply. Conventional investor loans typically require a down payment around 20% or more, higher credit scores, and cash reserves, since the property does not qualify for owner-occupied pricing. Alternatively, a DSCR loan qualifies on the property's projected rent, which helps income-light investors. [1] Consumer Financial Protection Bureau.
The numbers underwriting cares about: the rent you can realistically collect, the total payment including taxes and insurance, and the reserves you keep after closing. [2] U.S. Department of Housing and Urban Development. Your rental income is taxable, so keep the property accounts clean. [3] Internal Revenue Service. In San Antonio and the Hill Country, the loan structure should match the exit plan: hold for cash flow or flip for resale. Tell your loan officer the plan before you shop.
Conventional investor loans: the default for most rentals
Conventional investor loans are the default for most rentals. They follow Fannie Mae and Freddie Mac rules for 1 to 4 unit properties, and they come with a familiar structure and the widest lender pool. The catch is the down payment: investment properties typically want around 20% or more, plus cash reserves, because the owner-occupancy benefits that lower a primary residence down payment do not apply.
DSCR loans: qualify on the rent
DSCR loans offer a different door. The lender underwrites the property's projected rent against the total payment instead of your personal income, which helps investors whose tax returns do not reflect their real cash flow. The trade-off is higher pricing and a larger down payment, so DSCR is a tool for the right file, not an automatic upgrade.
Down payment and reserves: plan your cash before you shop
Plan your cash before you shop. Investment financing typically wants a larger down payment than owner-occupied, and the reserves requirement means you need cash left over after closing, not just enough to close. Add closing costs, repairs, and a vacancy cushion to the number, and you have the real cash requirement of the deal.
What lenders look at: rent, payment, reserves
Underwriting cares about three numbers: the rent you can realistically collect, the total payment including taxes and insurance, and the reserves you keep after closing. Your rental income is taxable, so keep the property accounts clean from day one. The cleaner the books, the easier every future loan becomes.
The Texas context: match the loan to the exit plan
In San Antonio and the Hill Country, the loan structure should match the exit plan: hold for cash flow or flip for resale. Tell your loan officer the plan before you shop, because the financing that fits a long-term rental is not the financing that fits a flip. Make it a great one: walk in with the rent, the expenses, and the reserves already worked out, and the lender will meet you halfway.
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