Investment Properties Mortgage Questions

Explore sample Investment Properties questions and educational explanations from the RatesQ team.

• What is the minimum down payment for an investment property?

  I want to buy a duplex as my first investment. I plan to live in one unit and rent the other. Does that change the down payment requirement vs buying a pure investment property?

  Yes, living in one unit makes a huge difference. A duplex where you occupy one unit is classified as an owner-occupied primary residence for financing purposes. That means you can use FHA with 3.5% down or conventional with as little as 5% (though 15-20% is common for 2-unit). For a pure investment property where you don't live there, you're typically looking at 15-25% minimum.

  Owner-occupied 2–4 unit is one of the best financing opportunities in real estate. FHA on a 2-unit: 3.5% down with 580+ credit, and you can use a portion of the rental income to help you qualify (75% of market rent per FHA guidelines). Conventional on a 2-unit: typically 15% down if using the second unit's rental income, or 5% if not including rental income in qualifying. One thing to plan for: you'll need 6 months of reserves (post-close) for multi-family regardless of loan type in most cases.

  House hacking is genuinely underrated. I did this with a duplex 3 years ago. The rent from the other unit covers most of my mortgage. Made the whole homeownership thing affordable. Just make sure you're okay being a landlord for your neighbor — proximity can get complicated.

• Can I use rental income to qualify for an investment property loan?

  I'm buying a rental property and the rents will be $2,200/month. The mortgage would be $1,750. Can I use the rental income to offset the new mortgage payment when qualifying?

  Yes, but at 75% of the gross rent. So $2,200 × 75% = $1,650/month of usable income. That's close to but not quite offsetting the $1,750 payment. If you have 2 years of Schedule E showing rental income, lenders can use that. For a new purchase with no lease yet, the appraiser's Form 1007 market rental analysis is typically used.

  Correct on the 75% rule for conventional. A few additional notes: if you don't have 2 years of landlord experience on your tax returns, some lenders are more conservative about counting rental income. Also, the full PITI (not just principal and interest) is used as the new obligation in DTI calculations. With $1,650 offsetting a $1,750 PITI, the net obligation to your DTI would be $100/month rather than the full $1,750 — which makes a significant difference in qualifying. DSCR lenders treat this differently (they just look at the rental income vs. debt service ratio on the property itself).