Non-Owner-Occupied Investor Loans, Explained
Every loan on a property you do not live in is priced and underwritten differently. Here are the main loan types, the typical terms, and how to pick the right one for the property.
A non-owner-occupied loan is any mortgage on a property you will not live in, and lenders price it higher and underwrite it more conservatively than a home loan: typically 20 to 25 percent down, rates a half point to two points above owner-occupied pricing, and reserves of three to six months. The upside is that investor loans come in more varieties, including several that do not require tax returns at all.
This guide explains why occupancy changes everything, walks through the main investor loan types with their typical numbers, and shows how to match the loan to the property and the plan.
Why occupancy matters so much
Lenders and regulators split loans into consumer-purpose and business-purpose. A loan on your own home is consumer-purpose and comes with a long list of rules on disclosures, timelines, and ability-to-repay. A loan on a rental is business-purpose. It moves faster, allows LLC ownership, and can be underwritten on the property's income instead of yours. It also carries more risk in the lender's eyes, because borrowers protect the roof over their own head first, so it costs more.
One warning: do not claim a property will be owner-occupied to get a better rate and then rent it out. That is occupancy fraud, and lenders check.
The main investor loan types
| Loan type | Qualifies on | Typical down payment | Typical term | Best for |
|---|---|---|---|---|
| DSCR loan | Property rent vs payment | 20 to 25 percent | 30 years, fixed or interest-only period | Rent-ready one to four unit rentals, LLC ownership, no tax returns |
| Conventional investment loan | Your personal income and debts | 15 to 25 percent | 30 years fixed | Borrowers with clean tax returns and fewer than ten financed properties |
| Bank or credit union portfolio loan | Your global finances and relationship | 20 to 30 percent | 5 to 10 year fixed, 20 to 25 year amortization | Local investors with strong personal financials |
| Bridge loan | Exit plan, property, borrower | 20 to 35 percent | 12 to 36 months, interest only | Value-add, lease-up, buying before selling |
| Hard money loan | Property equity | 10 to 35 percent | 6 to 18 months, interest only | Fast closes, heavy rehab, credit issues |
| Agency small balance (5+ units) | Property income, sponsor experience | 20 to 25 percent | 5 to 30 years | Stabilized apartment buildings, usually $1 million and up |
| SBA 7(a) or 504 | Your operating business | 10 to 15 percent | 20 to 25 years | Property your own business occupies at least 51 percent |
Choosing by property and plan
A rented single-family or small multifamily you plan to hold. A DSCR loan is usually the simplest. Qualification rides on the rent, you can close in an LLC, and the term is 30 years. If you have strong tax returns and few financed properties, a conventional investment loan may price lower.
A property that needs work before it rents. Start with a bridge or hard money loan to buy and fix, then refinance into a DSCR or bank loan once it is rented. Plan the exit before you close the first loan.
Five or more units. Agency small balance programs and bank loans dominate above $1 million. Below that, DSCR lenders that go to ten units and local banks are the options.
A building your business will occupy. SBA 7(a) or 504 offer the lowest down payment and longest terms, provided your business occupies at least 51 percent of the space.
Land or ground-up. These are construction and land loans, not investor mortgages. See construction loans on land you already own.
The typical numbers, side by side
| Item | Owner-occupied home loan | Non-owner-occupied investor loan |
|---|---|---|
| Minimum down payment | 3 to 5 percent | 15 to 25 percent |
| Rate compared with a home loan | Baseline | 0.5 to 2 points higher |
| Reserves | Often none | 3 to 6 months of payments |
| Income documentation | Required | Required on conventional and bank loans, not on DSCR, bridge, or hard money |
| Ownership | Personal | Personal or LLC, depending on the loan |
| Prepayment penalty | Rare | Common on DSCR, usually 3 to 5 years |
What every investor lender will ask for
- Credit. A 660 minimum is common; 700 and above improves pricing on every product.
- Down payment source. Seasoned funds, business funds you control, or documented gifts where the lender allows them.
- Reserves. Three months for one property, six months for larger loans or several financed properties.
- Property details. Address, purchase contract, leases or rent estimate, insurance quote, and an appraisal ordered by the lender.
- Entity documents. If closing in an LLC, the operating agreement, articles, and EIN letter.
- Experience. Not required for DSCR or conventional, but it improves terms on bridge, hard money, and multifamily.
Where investor loans get stuck
- Too many financed properties. Conventional loans cap at ten. DSCR lenders generally do not count them.
- Income that does not show on tax returns. Use a DSCR loan instead of fighting for a conventional one.
- Short-term rental income. Many DSCR lenders accept it with twelve months of history; conventional lenders often will not.
- A property in poor condition. Bridge or hard money first, permanent loan after.
- Mixed-use. Residential units over a storefront need a lender that handles both, which narrows the field.
How CommFi handles investor loans
One application covers every loan type above. Our lending desk prices the deal first and funds direct when it fits. When the property or the borrower needs a specific program, the desk searches a database of 7,000+ lenders and the ones that fit compete for the file. One point of contact from application to funding, and zero upfront fees.
Next step
Start the ten-minute application. You will get a pre-qualification letter that states the loan type, amount, and leverage that fit your property, which is the number to shop with.
Related answers
- What do lenders mean by reserves and how many months do I need?
- Can I get an investment property loan with a 620 credit score?
- How is a loan on 5+ units different from a 1-4 unit loan?
- How much down payment do I need for an apartment building?
- What DSCR do lenders require on multifamily?
- What is an agency small balance multifamily loan?
- What interest rates do apartment loans have?
- How do I finance a value-add apartment building?
- Do I need experience to buy a 5+ unit building?
- What is a non-recourse multifamily loan?
- What is the minimum loan amount for multifamily lenders?
- What is a personal financial statement and what goes on it?
- How much real estate experience do lenders require?
- What is global cash flow and why do lenders check it?
- What documents do I need for a commercial real estate loan?
- Do I have to sign a personal guarantee on a commercial loan?
- How much liquidity do commercial lenders require?
- How does the appraisal work on a commercial loan?
- Can I get a commercial loan with limited cash reserves?
- Can I get an investment property loan after a bankruptcy?
- Can I get a real estate loan after a foreclosure?
- Can I get a loan as a first-time developer?
- Can I get a real estate loan in an LLC?
- Can a foreign national get a US investment property loan?
- Can I get an investment loan if I am self-employed with low tax returns?
- Can I get a loan if I already have 10 financed properties?
- Can I get a loan with tax liens or judgments?
- Can I get a loan with a partner who has better credit or more cash?
Frequently asked questions
- What is a non-owner-occupied loan?
- A mortgage on a property you do not live in, such as a rental or a flip. Lenders classify it as business-purpose and price it higher than a home loan, typically by a half point to two points.
- How much down payment do investor loans require?
- Usually 20 to 25 percent. Conventional investment loans can go to 15 percent on a single-family with strong credit, and hard money can go lower on cost when the property has equity.
- Can I get an investor loan without tax returns?
- Yes. DSCR loans qualify on the property's rent, and bridge and hard money loans qualify on the property and the exit. Conventional and bank loans still require income documentation.
- Can I buy a rental property in an LLC?
- Yes with DSCR, bridge, hard money, bank portfolio, and agency loans. Conventional investment loans generally require personal ownership at closing.
- Are investor loan rates higher than home loan rates?
- Yes. Expect a half point to two points above owner-occupied pricing, depending on the loan type, leverage, credit score, and property.
- Is a second home the same as an investment property?
- No. A second home is one you use yourself part of the year and is priced between a primary home and an investment property. A property you rent out most of the year is an investment property.
Property developer and licensed appraiser. 22+ years in real estate: TIC conversions, multi-unit redevelopments, mixed-use, fix and flips, commercial DSCR.