If you’re considering real estate investing or expanding your rental portfolio, understanding your financing options is essential. An investment property mortgage is a key tool to help fund long-term and short-term rental strategies whether you’re buying your first rental or scaling across multiple markets.

At Newfi, we offer flexible financing solutions tailored for real estate investors. One powerful option is the DSCR loan, which qualifies you based on property cash flow rather than personal income. This guide covers the key mortgage types available and how DSCR loans may align with your strategy.

Why Real Estate Investors Use Mortgages

Investor demand remains high. According to Redfin’s August 2024 report, investors purchased 16.8% of U.S. homes sold in Q2—valued at $43 billion.

The combination of rising home prices and strong rental demand means more Americans are renting, creating opportunity for income-focused property owners. Mortgages help investors leverage existing capital into new properties and diversify their income streams.

What’s an Investment Property Mortgage?

An investment property mortgage is a loan used to purchase real estate with the goal of generating income. Borrowers can achieve this by renovating and reselling, renting to long-term tenants, or using platforms like Airbnb or VRBO.

How to Get a Mortgage for an Investment Property

There are various options for investment property mortgages, each with its own requirements and qualifying standards. In this blog, we’ll discuss three common types: traditional conventional loans, hard money loans, and DSCR (Debt Service Coverage Ratio) loans.

Types of Investment Property Loan Options

Traditional Conventional Investment Property Loans

Traditional conventional loans are the most common type of mortgage loan. Traditional conventional loans can also be an excellent option for financing a second home if you’re looking to use it as a long-term rental property or vacation home. These loans are offered by most lenders and are backed by Fannie Mae and Freddie Mac which have strict standards for qualifying. Traditional conventional loans for investment properties require borrowers to meet higher standards than primary residences because non-owner-occupied mortgages are often seen as riskier loan for lenders.

Since these loans only qualify borrowers with higher down payments, credit scores, and other limiting factors, lenders can offer lower interest rates on these loans.

Although monthly payments may be higher and these financing options may cost investors more upfront.

• Ideal Investor: First-Time investors who are looking to rent to a long-term tenant
• Loan Options: Offer standard 15-, 20, and 30-Year fixed rate loan options
• Down Payment: Dependent on your credit score and debt-to-income ratio, but typically non-owner-occupied mortgages require 20% down.
• Credit Score Requirements: A high credit score is typically required for traditional conventional investment property mortgages, starting at 680
• Debt-to-Income Ratio: You will need to be able to take on your investment property mortgage with your current income. These lenders will take a portion of the rents to offset your debt obligation. Typically, 75% of rents is used.
• Interest Rates: A typically lower, fixed rate is offered
• Real Estate Portfolio Restrictions: Traditional conventional lenders will consider each of your properties in your real estate portfolio. You will have to file more paperwork than other options on your personal ability to carry the mortgage. There are also restrictions on the number of properties you have mortgages on. If you already have an investment property, you cannot use short term rental income to qualify for this loan.

Hard Money Loans

Hard money mortgage loans are short term loans that help investors finance a property that they don’t plan to hold onto for long. You will need to pay the entire hard money loan back between two to five years of taking the mortgage out. These mortgages tend to have much higher interest rates and down payments required. Hard money investment property loans may be beneficial for borrowers looking for a quick turnaround in financing because they close faster than traditional conventional loans. These are also referred to as a short-term bridge loan. While primarily used for fix-and-flip properties, hard money loans can also help you purchase a second home that requires quick financing.

• Ideal Investor: Investors who are looking to fix and flip a property within the short repayment timeline of a hard money mortgage loan.
• Loan Options: Short-term loan options typically need to be repaid within 2 to 5 years.
• Down Payment: Down payments are higher than traditional conventional or DSCR Loans. Hard money loans are considered riskier to lenders and therefore require higher down payments.
• Credit Score Requirements: Dependent on lenders requirements. On average, credit scores can be lower than traditional conventional mortgage options.
• Debt-to-Income Ratio: This will also be dependent on lenders requirements.
• Interest Rates: Because these loans are riskier for lenders, they tend to have higher interest rates than Conventional or DSCR Loans.
• Real Estate Portfolio Restrictions: Hard money lenders will place restrictions on the number of properties you can carry to qualify with them.

Explore how DSCR loans offer a longer-term, cash-flow-based alternative to hard money loans: DSCR vs Hard Money Loans.

DSCR Loans: Cash-Flow-Based Financing

A DSCR loan is a mortgage for an investment property that qualifies borrowers based on their expected rental income. At Newfi this means that we never look at your personal income or proof of employment to qualify you, only the income your property is expected to make month over month. These loans are also referred to as business purpose or private lender loans.

• Ideal Investor: More experienced investors with multiple long-term and short-term investment properties
• Loan Options: DSCR Loans offer more loan term options with 15-, 30-, & 40-Year Fixed Mortgages and 30- and 40-Year Interest Only options.
• Down Payment: With a DSCR Loan, your down payment could be between 20%-25%. We off the option to refinance and get cash-out of your other properties for the down payment on your investment property!
• Credit Score Requirements: Credit score requirements are lower than traditional conventional loans, starting at 640.
• Debt-to-Income Ratio: Because we don’t take your personal income or employment into consideration when qualifying you for a DSCR Loan and will not need to look at your DTI.
• Interest Rates: Our DSCR Loans give borrowers options. We offer 15-, 30-, & 40-Year Fixed Mortgages and 30- and 40-Year Interest Only options
• Consider Real Estate Portfolio: We don’t look at you real estate portfolio when qualifying you for a DSCR Loan. There are also no restrictions on the number of properties you’re allowed to carry.

Learn more about DSCR Loans and how they support scalable real estate investing: DSCR Loans.

When to Use Each Type of Investment Mortgage

Choosing the right financing depends on your investment goal:

• Buy-and-hold rentals: Consider Conventional or DSCR for stable terms
• Fix-and-flip projects: Use Hard Money for quick close and short-term needs
• Short-term rentals (Airbnb/VRBO): DSCR loans may be the better fit since income from nightly rates can be used for qualification

Airbnb Financing with DSCR

Short-term rental investors can leverage DSCR loans to finance Airbnb or VRBO properties, qualifying based on projected rental income. This approach works well for experienced investors seeking to expand their portfolios.

Discover how DSCR Loans for Airbnb can boost your short-term rental success: DSCR Loans for Airbnb.

Why Use a DSCR Loan?

Newfi’s DSCR loans are designed for real estate investors who want flexible, cash-flow-based financing without the hurdles of traditional loan requirements.

We Require Less Documentation and Offer a Quicker Loan Process

With traditional conventional and hard money mortgage options, you may find yourself overwhelmed with paperwork. Because a DSCR Loan with Newfi qualifies borrowers based on their expected market rent, we won’t look at your tax returns, paystubs, or debt at all during the loan process!

We Qualify Borrowers Based on Cash-Flow

At Newfi, our DSCR Loan only focuses on the cash flow of your property! We know many investors have a difficult time qualifying for an investment property mortgage because of a large real estate portfolio of other investment properties or not having traditional employment documentation. That’s why we qualify you based on your expected market rent!

We Allow You to Leverage Existing Equity into a New Investment Property

Newfi makes it easier to reinvest by allowing borrowers to cash out reserves from existing properties to use as a down payment on their next investment.

Explore how DSCR Loan Benefits can unlock new opportunities: DSCR Loan Benefits
See specific qualification standards and requirements: DSCR Loan Requirements

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