Mortgage Programs for Investment Property

A $325,000 Richmond-area rental with 20% down means a $260,000 loan. If your rate is 7.125% instead of 7.875%, the principal and interest payment drops by about $130 a month. Over five years, that is roughly $7,800 in payment difference before you even count cash flow, reserves, or repair costs. That is why choosing among mortgage programs for investment property is not a paperwork detail – it is a return-on-capital decision.

For local context, price matters immediately. The median home value in the City of Richmond has been around the mid-$300,000 range, while nearby Chesterfield and Henrico often trend higher, commonly in the upper-$300,000s to low-$400,000s depending on the source and month tracked. If you are buying a one-unit rental around $350,000 to $425,000, your financing choices usually fall into four real buckets: conventional investor loans, DSCR loans, bank statement or other non-QM options, and true commercial financing for larger or mixed-use deals.

Which mortgage programs for investment property fit best?

The best answer depends on what is tight in your file. If your income is easy to document and your debt-to-income ratio works, conventional financing is often the cheapest path. If your tax returns show little income because you write off aggressively, a DSCR or bank statement loan may be the better fit even if the rate is higher. If the property has five or more units, or if the deal is more about business income than personal borrowing strength, commercial lending enters the picture.

For many Richmond investors buying a 1-4 unit property, conventional financing is the starting point. These loans usually want stronger credit, documented income, and larger down payments than owner-occupied loans. Expect a minimum down payment of 15% for some one-unit investment properties, but 20% to 25% is more common if you want better pricing and a cleaner approval. Credit score thresholds often start at 680, though 700 to 740-plus generally opens the best execution. Reserves matter too. Six months of principal, interest, taxes, insurance, and association dues is a common baseline, and some files require more.

The 2025 conforming loan limit for a one-unit property in most areas, including Richmond, is $806,500. That matters because staying at or below the conforming limit can keep pricing and underwriting more favorable than jumbo territory. You can review the current limit at https://www.fhfa.gov/data/conforming-loan-limit.

Conventional investor loans

Conventional loans are usually strongest for borrowers with solid W-2 income, good tax returns, and a straightforward property. On a single-family rental, you may be able to put 15% down, but mortgage insurance or pricing hits can make that route less attractive than 20% down. On a two- to four-unit investment property, down payment requirements often rise, and reserve expectations can grow as well.

Closing costs for a conventional investment purchase often land around 2% to 4% of the loan amount, depending on points, title charges, escrows, and whether the seller contributes. On a $300,000 loan, that is roughly $6,000 to $12,000. The upside is long-term cost. If you qualify cleanly, conventional is often the lowest-rate non-owner-occupied option.

DSCR loans for investors

If there is one program that has changed the game for local real estate investors, it is the DSCR loan. DSCR stands for debt service coverage ratio. Instead of focusing primarily on your personal tax return income, the lender looks at whether the property cash flow supports the payment. In plain English, if the market rent covers the monthly housing expense well enough, the deal may work even when conventional underwriting does not.

A common target is a DSCR of 1.00 or higher, though some lenders allow lower with stronger compensating factors. Credit score minimums often start around 620 to 660, while better rates typically show up closer to 680 to 720 and above. Down payments usually start at 20%, with stronger pricing often at 25%. Reserve requirements commonly range from 3 to 12 months depending on credit, property type, and cash-out versus purchase.

This option is often a fit for self-employed investors, borrowers scaling quickly, and buyers who do not want each new rental to be limited by personal debt-to-income ratios. The trade-off is cost. Rates and fees are usually higher than conventional. Still, if a DSCR loan lets you buy the next property while preserving liquidity, the math can still work.

For background on consumer mortgage basics and how lenders evaluate affordability and risk, the CFPB has a useful overview at https://www.consumerfinance.gov/owning-a-home/.

Mortgage programs for investment property with nontraditional income

Bank statement loans and other non-QM products are designed for borrowers whose real income is not well reflected on tax returns. Think business owners, 1099 earners, consultants, and investors with complex write-offs. Instead of tax return net income, lenders may use 12 or 24 months of business or personal bank statements to estimate qualifying income.

These loans can be valuable when you have strong deposits but weak taxable income on paper. Credit score minimums often begin around 620 to 660, and 10% down may exist in some owner-occupied non-QM scenarios, but for investment property, 15% to 25% down is more typical. Reserves are often heavier than conventional. Many investors should expect 6 to 12 months, and larger portfolios may trigger more.

The trade-off, again, is pricing. Non-QM investor loans usually carry a higher rate and may include more points or lender fees. But if the alternative is waiting two years to show enough taxable income, paying a premium for workable financing may be the better business decision.

When commercial financing makes more sense

If the property has five or more units, has a mixed-use layout, or is being underwritten primarily as a business asset, commercial lending may be more appropriate than residential mortgage products. Commercial loans look harder at net operating income, lease structure, and property condition. Terms can be shorter, prepayment penalties may apply, and amortization does not always match the note term.

For a small investor buying a duplex, triplex, or fourplex, residential investor financing is often simpler. For larger assets, commercial financing can open more flexibility, but it comes with a different approval mindset and often more negotiation around structure.

What Richmond investors should check before applying

Start with the property itself. A clean single-family rental in stable condition is easier to finance than a heavy-rehab project or a condo with litigation issues. If renovation is needed, you may need construction or rehab financing rather than a standard investor mortgage.

Next, look at your liquidity. Many buyers focus on down payment and forget reserves. On a $2,200 monthly housing payment, six months of reserves means $13,200 still in the bank after closing. If you own other financed properties, lenders may require reserves for those too. That is a common surprise.

Then review your credit strategy. The difference between a 679 score and a 720 score can change rate, points, and even program eligibility. If you are still shopping, a soft-pull prequalification can help you compare options without immediately putting pressure on your score.

Finally, be honest about your objective. If your goal is lowest rate on a long-term hold, conventional should be tested first. If your goal is speed, scalability, or income flexibility, DSCR or non-QM may win even at a higher note rate.

A quick side-by-side view

Conventional investor loans are usually best for borrowers with documented income, credit often above 680, down payments commonly at 15% to 25%, and reserves often around 6 months or more. DSCR loans fit investors focused on rental cash flow, with credit often starting in the low- to mid-600s, down payments usually 20% to 25%, and reserves from 3 to 12 months. Bank statement and other non-QM options help self-employed borrowers with strong deposits but complicated tax returns, usually with 15% to 25% down and 6 to 12 months of reserves. Commercial loans are better for five-plus units or mixed-use assets and are structured more around the property as a business.

For current Richmond market pricing context, consumer-facing housing data can be tracked through sources such as https://www.zillow.com/home-values/.

FAQ

What is the minimum down payment for an investment property?

In many cases, 15% is the floor for a one-unit conventional investment property, but 20% to 25% is more common in real-world approvals and pricing. DSCR and non-QM programs also commonly start at 20% down.

What credit score do I need?

A 620 score may open some DSCR or non-QM options, but conventional investor financing usually works better from 680 up. The best pricing often starts around 720 or higher.

Are rates higher for investment properties?

Yes. Investment property loans typically price higher than primary residence loans because default risk is viewed differently. The gap varies by program, credit score, equity, reserves, and occupancy.

How much should I budget for closing costs?

A practical range is about 2% to 4% of the loan amount, with additional cash needed for down payment, prepaid taxes and insurance, and reserve requirements.

The right investor loan is not always the one with the lowest rate on page one. It is the one that fits your income, preserves enough cash after closing, and still leaves the deal working when rents, repairs, and vacancies behave like the real world. Richmond Brokers can help you compare those paths carefully, especially when a soft-pull prequalification gives you room to shop without rushing your credit profile.