11 Types of Rental Property Loans for Real Estate Investors

Securing the right financing is one of the most critical steps in building a successful real estate portfolio. The loan you choose can impact your cash flow, return on investment, and ability to scale your operations. With so many options available, it can be challenging to determine which one aligns with your investment goals.

This guide explores 11 common types of rental property loans available to investors. We’ll cover the key features of each, including typical down payment and credit score requirements, and explain which options are best suited for different types of investors—from those buying their first property to seasoned professionals.

Loans for New Investors

If you’re just starting, these loans offer accessible entry points into the real estate market.

1. Conventional Mortgages

A conventional mortgage is the most common type of home loan. While often associated with primary residences, you can also use them to purchase investment properties. Lenders typically require a higher down payment and credit score for non-owner-occupied homes.

• Ideal for: New investors with strong credit and stable income.
• Down Payment: 20–25%
• Credit Score: 620+

2. FHA Loans

Insured by the Federal Housing Administration, FHA loans are designed for buyers with lower credit scores and smaller down payments. The key requirement is that you must live in the property for at least one year. This makes them perfect for “house hacking”—buying a multi-unit property, living in one unit, and renting out the others.

• Ideal for: First-time investors who plan to owner-occupy a multi-family property.
• Down Payment: As low as 3.5%
• Credit Score: 580+

3. VA Loans

VA loans are a benefit for eligible veterans, active-duty service members, and surviving spouses. Like FHA loans, they require the borrower to occupy the property. A major advantage is that they don’t require a down payment, making them an excellent option for house hacking a property with up to four units.

• Ideal for: Eligible military members looking to start their investment journey.
• Down Payment: 0%
• Credit Score: Typically 620+

Loans for Experienced Investors

Seasoned investors often need more flexible or specialized financing to grow their portfolios.

4. DSCR Loans

Debt Service Coverage Ratio (DSCR) loans are a game-changer for experienced investors. Instead of verifying your personal income, lenders qualify you based on the rental property’s potential income. A DSCR of 1.25, for example, means the property’s rental income is 25% higher than its mortgage payment.

• Ideal for: Investors who want to qualify based on property cash flow, not personal W-2s.
• Down Payment: 20–25%
• Credit Score: 640+

5. Portfolio Loans

If you own multiple properties, a portfolio loan allows you to bundle them under a single mortgage. This simplifies payments and can help you leverage your existing equity to finance new purchases. These are non-qualified mortgages, meaning lenders set their own terms.

• Ideal for: Investors with several properties looking to streamline their finances.
• Down Payment: Varies by lender.
• Credit Score: Varies by lender.

6. Blanket Mortgages

Similar to portfolio loans, a blanket mortgage is a single loan that covers two or more properties. A key feature is the “release clause,” which allows you to sell one of the properties without having to refinance the entire loan.

• Ideal for: Investors who plan to buy and sell properties within their portfolio.
• Down Payment: Varies.
• Credit Score: Varies.

Flexible and Short-Term Financing

These loans are tailored for specific investment strategies, such as flipping or short-term rentals.

7. Hard Money Loans

Hard money loans are short-term loans from private investors or companies. They focus on the property’s value rather than your credit history and can be funded quickly. Because of the higher risk, they come with higher interest rates and fees.

• Ideal for: House flippers who need fast funding for a purchase and renovation.
• Down Payment: 10–25%
• Credit Score: Often no minimum.

8. Fix-and-Flip Loans

Specifically designed for flipping properties, these short-term loans often cover both the purchase price and renovation costs. They provide the capital needed to get a project off the ground quickly.

• Ideal for: Investors focused on renovating and reselling properties.
• Down Payment: 10–20%
• Credit Score: 620+

9. HELOC

A Home Equity Line of Credit (HELOC) lets you borrow against the equity in your primary residence or another investment property. It functions like a credit card, allowing you to draw and repay funds as needed, making it a flexible source of capital for down payments or renovations.

• Ideal for: Investors who want a flexible credit line for various real estate expenses.
• Down Payment: N/A (based on existing equity).
• Credit Score: 680+

10. Seller Financing

With seller financing, the property owner acts as the lender. Instead of getting a mortgage from a bank, you make payments directly to the seller based on agreed-upon terms. This can be a creative solution when traditional financing isn’t an option.

• Ideal for: Buyers who may not qualify for a traditional loan or want more flexible terms.
• Down Payment: Negotiable.
• Credit Score: Negotiable.

11. Private Money Loans

Private money loans come from individuals—like friends, family, or other investors—rather than a financial institution. The terms are entirely negotiable, offering significant flexibility for unique investment opportunities.

• Ideal for: Investors with a strong network who need customized loan terms.
• Down Payment: Negotiable.
• Credit Score: Negotiable.

Find the Right Loan for Your Strategy

Choosing the right rental property loan depends on your financial situation, experience level, and investment goals. If you’re a new investor with a solid W-2, a conventional loan might be perfect. If you’re a seasoned pro scaling your portfolio, a DSCR or portfolio loan could be a better fit.Understanding your options is the first step toward making a smart investment. At Altius Mortgage, our team of experts in Draper, UT, is here to help you navigate the financing landscape and secure the best loan for your next rental property. Contact us today to learn more and get started on your real estate investment journey.