How to Finance a Rental Property: Options and Comparison

Conventional loans are issued by banks for owner-occupied or rental properties if you have strong personal income and credit (700+). Requirements: 15-25% down on investment properties, a debt-to-income limit (up to 50% under Fannie Mae's automated underwriting), full financial documentation (tax returns, W2s, bank statements), 30-45 day close. Advantage: usually the lowest rates and longest terms (30 years). Disadvantage: every financed property counts against your DTI, and Fannie Mae caps borrowers at 10 financed properties; personal income must be strong. Best for: first one or two investment properties where you have excellent income and credit.

DSCR loans are issued by private and portfolio lenders for rental properties. Requirements: a credit check, 20%+ down plus at least 3 months of reserves, a property DSCR that supports the payment, and an entity (LLC or corporation). No tax returns, no DTI calculation, no personal income verification. LYNK Mortgage closes DSCR in 15–21 days typical. Advantage: scales (no property count limit), fast, easy qualification, good for self-employed or complex income. Disadvantage: higher rates than conventional (typically 6-8%), stricter DSCR requirement (property must cash flow). Best for: investors building portfolios (3+ properties), self-employed investors, anyone who wants to scale without DTI limits.

Some banks keep loans in-house (portfolio) instead of selling to Fannie Mae. These loans have rates between conventional and DSCR. Requirements vary by bank but typically: 25% down, 640+ credit, property DSCR 1.0+, tax returns preferred but flexible. Close in 20-30 days. Advantage: moderate rates and no DTI limits (like DSCR). Disadvantage: bank-specific (not portable; if the bank changes lending policies, you're stuck), limited availability, less aggressive underwriting (tougher than DSCR). Best for: borrowers with strong income and credit who want moderate rates without conventional bank limits.

Bridge loans and hard money are short-term (6-24 months) asset-based loans for fix & flip or bridge scenarios. Requirements: 25-30%+ down, property has exit strategy (refinance, sale, ARV analysis), credit check but less strict than DSCR. Close in 7-10 days. Advantage: fastest close, flexible underwriting, works for rough properties (fix & flip). Disadvantage: expensive (8-12%+ rates), short terms (you must refinance or sell within 12-24 months), prepayment penalties common. Best for: flipping projects, bridge-to-perm scenarios, deals where speed matters and property is rough.

Strong W2 income + 700+ credit + 1 property: Conventional (usually the lowest rate). Self-employed or building portfolio: DSCR (LYNK Mortgage, 15–21 day typical close). Need moderate rates + scale: Portfolio loan (if you can find one; limited availability). Flipping a house or bridging: LYNK Mortgage hard money or fix & flip product (7–15 days typical). Unstable credit but strong deal: Hard money (8-12% rate). Each path has trade-offs. LYNK Mortgage can help you model multiple options and choose the lowest cost for your timeline.