8 Best Rental Property Loans Types Smart Investors Use

Did you know? Real estate investors are required to acquire loans with much stricter financing terms than the primary homebuyers, specifically with 20-30% down payments, 3-5% for owner-occupied homes and, a minimum credit score of 620, and a higher rate of interest. The increase in minimums to a debt-to-income (DTI) ratio of 36% is another obstacle that stands in the way of new investors. Nevertheless, the benefits of tax deductions on the interest of a mortgage and the alternative debt sourcing will allow new investors to take off in the real estate field.

To deal with these barriers, I managed to find 8 types of rental property loans smart investors are using in 2025.

While most of the loans are of traditional form, there are alternatives such as DSCR or blanket loans that are good for such investors as it prioritizes cash flow financing or scales the portfolio of assets. A proper decision refers to the creditworthiness, cash reserves, and the length of your strategy.

Let’s take a tour through every possibility available so you can locate the perfect match with your investment strategy.

Conventional Bank Loans for Rental Properties

Conventional bank loans are the life-blood of rental property financing that offer competitive interest rates and structured terms. Private lenders provide these loans without government backing but follow Fannie Mae and Freddie Mac guidelines.

Current Interest Rates and Terms

Investment property mortgage rates exceed primary residence rates by 0.50% to 0.75%. To cite an instance, a primary residence mortgage rate of 3.25% means an investment property loan could range from 3.75% to 4.125%. Fannie Mae’s lending guidelines outline additional risk-based surcharges – properties with 60% LTV or lower face a 1.125% charge, while 80% LTV loans carry a substantial 4.125% surcharge.

Qualification Requirements

Borrowers must meet specific criteria to get a conventional rental property loan:

• Credit Score: Borrowers need a 680 minimum score with 15% down, though they can qualify with 620 by putting 25% down
• Down Payment: The range spans 15% to 25%, with higher down payments earning better rates
• Debt-to-Income Ratio: Lenders typically accept a DTI between 36-45%
• Cash Reserves: Most lenders ask for 6 months of mortgage payments in reserves.

Borrowers must show stable income through two years of tax returns or recent pay stubs. The property value should match or exceed the purchase price.

Best Banks for Rental Property Loans in 2025

These banks excel in rental property lending programs:

• U.S. Bank: Long-term owner-occupied CRE loans stretch up to 25 years
• Chase: Business lines of credit and CRE financing among various options
• Wells Fargo: Dedicated teams handle multifamily property financing
• First Internet Bank: Office space, multifamily, retail, and industrial properties are their focus
• Truist: Small business real estate loans reach up to $250,000

Application Process and Timeline

The loan application moves through these essential steps:

• Pre-Approval: A letter shows your qualification amount
• Complete Application: Your property and financial details go to the lender
• Property Appraisal: Market value assessment takes place
• Underwriting Review: Financial documents, credit history, and property appraisal get reviewed
• Final Approval: You receive a commitment letter with loan terms

Lenders look at personal credit qualifications and the property’s profit potential during this process. Property management experience or having a manager helps secure better loan approval odds and rates. Credit unions and community banks tend to work more flexibly with unique situations than larger institutions.

FHA Multifamily Loans

The Federal Housing Administration has updated its multifamily loan programs, giving investors new opportunities in 2025. These changes want to increase both affordable and market-rate housing supply nationwide.

FHA Loan Requirements

You just need to meet specific criteria to get FHA multifamily loan approval:

• Credit Score: Minimum 580 for a 3.5% down payment, or 500-579 for a 10% down payment
• Debt-to-Income Ratio: Must stay under 43%
• Property Standards: Each unit must have complete kitchen and bathroom facilities
• Income Verification: Two years of steady employment history through tax returns, W-2s, or 1099s

FHA has rolled out new loan-to-value ratios and debt service coverage requirements for 2025:

• Market Rate Properties: 87% LTV with 1.15x DSCR
• Affordable Housing: 90% LTV with 1.11x DSCR
• Middle Income Housing: 90% LTC with 1.11x DSCR

Benefits for Real Estate Investors

FHA multifamily financing comes with several perks:
These loans offer competitive terms through FHA-approved lenders. The program makes up about 9.2% of the mortgage market. Loan terms stretch from 35 to 40 years – substantially longer than conventional options.

The updated 2025 policies reduce cash needed at closing for FHA transactions. This change makes FHA loans more competitive with current market demands, especially when you have developers working on affordable rental properties.

The program supports properties of all types, including:

• New construction projects
• Substantial rehabilitation
• Property acquisition
• Refinancing opportunities

Property Types Eligible

FHA’s property eligibility criteria have expanded with recent policy updates. Qualified properties now fall into these categories:

Health Care Facilities:

• Financing available under Sections 232 and 242
• Covers both new construction and refinancing options

Rental Housing:

• Sections 207 and 223(f) support multifamily rental acquisitions
• Properties needing substantial renovation must complete critical repairs before approval

Special Purpose Housing:

• Section 202 finances housing for lower-income older adults
• Section 811 supports rental housing for individuals with disabilities

The Biden-Harris Administration’s 2025 initiatives have FHA focusing on properties that serve residents at specific income levels:

• Affordable units: Targeting people below 80% of area median income
• Middle-income housing: Supporting those at or below 120% of area median income

These new policies show FHA’s steadfast dedication to expanding housing supply while making it accessible to people at different income levels. The program actively supports both market-rate and affordable housing development through lower debt-service coverage ratios and higher loan-to-value allowances.

Portfolio Loans

Portfolio loans are a different way to finance property where lenders keep the loans instead of selling them in the secondary market. These loans give borrowers more flexibility with qualification requirements. Real estate investors find them appealing when looking for alternative funding sources.

How Portfolio Loans Work

Portfolio lenders keep complete control over their lending criteria by holding the loans on their balance sheets. This setup lets them tailor loan terms to individual circumstances rather than following strict conventional guidelines.

Most portfolio loans need down payments between 20% to 30% of the property’s purchase price. Interest rates usually range from 5% to 10%, based on the borrower’s qualifications and the lender’s review.

The approval process looks at:

• Property cash flow evaluation
• Debt service coverage ratio (DSCR)
• Asset-based lending criteria
• Property-specific documentation

Comparing Portfolio Lenders

Several factors matter when choosing portfolio lenders:
Community banks are more flexible than larger institutions and cater to local market needs. These smaller lenders often adjust loan terms to match seasonal income patterns or specific property situations.

Portfolio lenders vary in their maximum loan amounts and terms:

• Some give loans up to $50 million
• Loan terms span 5 to 30 years
• Interest rates begin at 7.05% to 12% depending on the program

Pros and Cons for Investors

Advantages:

1. Qualification Flexibility: Portfolio lenders accept borrowers with credit scores as low as 600, though most want 650 and above. This flexibility helps self-employed investors and those with complex income structures.

2. Property Type Diversity: These loans work with various properties, including:

• Single-family rentals
• Multi-unit dwellings
• Mixed-use properties
• Properties needing rehabilitation

3. Multiple Property Financing: Investors can bundle several properties under one loan with portfolio lending. This streamlines management and might lower overall costs.

Disadvantages:

1. Higher Costs: Portfolio loans come with:

• Higher interest rates than conventional mortgages
• Possible prepayment penalties
• Extra fees to cover the lender’s risk

2. Limited Availability: Finding the right lender takes time since not every institution offers portfolio loans.

3. Larger Down Payments: Portfolio lenders usually ask for higher down payments of 20-30% upfront to reduce their risk.

Real estate investors who need rental property loans beyond conventional options can turn to portfolio loans. These loans work well for investors who manage multiple properties or face unique situations that traditional lenders might avoid. Smart lender selection and clear understanding of terms help investors use portfolio loans to grow their real estate holdings.

Private Money Loans

Private money lending creates opportunities for real estate investors who need alternatives to traditional financing. Individual investors or groups fund these loans that provide quick capital access with flexible qualification requirements.

Finding Private Lenders

Private money’s life-blood is networking. Real estate investment groups, local networking events, and professional connections help you find potential lenders. Public records show cash buyers who might want to lend.

These strategies help you connect with private lenders:

• Building relationships within real estate circles
• Attending industry events and investment clubs
• Creating a social-first presence
• Looking up recent property transactions in your area

New borrowers should reach out to their immediate network first. Family members and friends often become the original private lenders because they understand the investment potential and trust the borrower.

Negotiating Terms

Private money loans usually run shorter, from 6 months to 3 years. Interest rates typically range between 8% to 15%, with points from 2% to 10% of the loan amount.

These elements need attention during negotiations:

• Loan Amount: Based on property value and investment strategy
• Interest Rate: Risk assessment and relationship strength determine this
• Points: Upfront fees as percentage of loan amount
• Payment Schedule: Monthly interest-only payments are standard
• Loan Duration: Project timeline sets this

A successful negotiation needs solid preparation. Investors must show:

• Detailed project plans
• Property valuation data
• Exit strategy documentation
• Past performance records

When to Use Private Money

Private lending shines in specific situations:

Speed matters most. Private lenders process loans within 7-10 days. This quick funding gives investors an edge in competitive markets.

Properties needing rehabilitation benefit from private money. These lenders care more about the property’s potential value than its current state. They review deals based on after-repair value instead of current market worth.

Private money becomes crucial when:

• Traditional financing isn’t available
• Properties don’t meet conventional standards
• Deals need quick closing
• You need creative financing solutions

Private lenders focus on asset value and potential returns. Credit requirements stay more flexible than traditional loans. Most private lenders look at:

• Property features and value
• Investment strategy viability
• Clear exit plans
• Strong collateral

Private money loans are a great way to get reduced documentation requirements and streamlined approvals. Notwithstanding that, borrowers should think about the higher costs, including elevated interest rates and shorter repayment terms.

DSCR Loans

DSCR loans are changing the game for real estate investors in 2025. These loans look at the property’s cash flow instead of personal income documents.

Understanding DSCR Requirements

The Debt Service Coverage Ratio shows how well a property’s rental income can cover mortgage payments and expenses. Lenders want to see a DSCR of 1.25 or higher. This ratio proves that the property makes 25% more income than needed to pay back the loan.

The DSCR calculation is simple: Monthly Rental Income ÷ PITIA (Principal, Interest, Taxes, Insurance, and Association dues)

Here’s a real example: A property that brings in $50,000 yearly rental income with $40,000 in annual debt would have a DSCR of 1.25.

Current DSCR Loan Rates

February 2025 DSCR loan rates sit between 6.5% and 8.5%. The average rate is 7.65% for 30-year fixed loans with a 25% down payment. These rates run 1% to 1.5% higher than regular mortgage rates because of their unique structure.

Several factors shape DSCR loan rates:

• Your credit score
• The loan-to-value ratio
• Where the property is and what type it is
• How much investment experience you have

Qualification Process

The property’s performance matters more than personal finances when qualifying. You’ll need:

• A FICO score of at least 660 with most lenders
• 20-25% down payment
• Property worth $75,000 minimum
• A loan-to-value ratio no higher than 70-80%

DSCR loans skip many traditional requirements. You won’t need:

• Hard credit checks
• Income verification
• Tax returns
• Employment details

Best DSCR Lenders

The top DSCR lenders of 2025 have programs that fit different investor needs.
RCN Capital leads with great rates and flexible terms. CrossCountry Mortgage stands out by offering various loan options. Griffin Funding lets investors qualify with DSCR ratios as low as 0.75, which gives unique flexibility.

Top lenders usually offer:

• Fixed rates from 15 to 40 years
• Interest-only payment options
• Cash-out refinancing choices

DSCR loans now work with many investment types, from single-family homes to multi-unit buildings. Investors can get multiple DSCR loans up to their limit. This makes these loans perfect for growing your portfolio.

Hard Money Loans

Hard money loans are vital financing tools that help real estate investors buy properties quickly. These asset-based loans come from private individuals or companies who care more about property value than the borrower’s credit score.

Current Market Rates

Hard money loan interest rates range from 10% to 18% as of May 2024. These numbers are higher than traditional mortgages, which sit between 6.95% and 10.5%. Lenders also charge origination fees or “points” that range from 1% to 5% of the loan amount.

Key rate factors include:

• Loan-to-value ratio (LTV): Lenders typically fund 65-75% of current property value
• Loan duration: Most loans run for 6 to 18 months
• Property type and condition
• Borrower’s investment experience

Best Hard Money Lenders

The top hard money lenders stand out with their unique services:

1. RCN Capital

• Specializes in fix-and-flip financing
• Handles large loan amounts
• Closes deals quickly

2. Lima One Capital

• Works with various investment strategies
• Keeps rates competitive
• Supports multiple property types

3. Groundfloor

• Welcomes new investors
• Makes application simple
• Has flexible qualification rules

These lenders share common traits:

• They approve loans within 10 business days
• Ask for minimal paperwork
• Look at property value more than credit history

When to Consider Hard Money

Hard money loans work best in specific situations:
Speed is the biggest advantage. You can get funding in just 10 days compared to traditional banks that take 30-50 days. This makes a huge difference in competitive markets or auction purchases.

Property flippers who plan to renovate and sell within a year benefit most. The higher costs matter less because of the quick turnaround time.

These loans also help:

• Investors with credit issues but substantial down payments
• Properties that need immediate fixes
• Deals that must close quickly
• Projects that banks won’t finance

The approval process looks at:

• The property’s value as collateral
• Your ability to make a down payment (usually 25-35%)
• A clear exit plan
• Your renovation timeline

Hard money loans cost more than regular bank loans. The higher rates buy you faster access to money, easier approval, and flexible payment options. Lenders look mainly at the property value, which speeds up decisions without needing lots of financial documents.

Rich investors who need quick property funding without bank red tape find hard money loans practical. These loans bridge financial gaps and let investors grab opportunities they might otherwise miss.

Commercial Blanket Loans

Blanket loans give real estate investors a powerful way to manage multiple properties under a single mortgage. This financing option makes property management easier with united payments and simpler documentation.

Benefits for Multiple Properties

A blanket mortgage cuts down administrative complexities by putting several properties under one loan agreement. This united approach helps investors save big on closing costs and fees they’d normally pay for multiple individual mortgages.

Key advantages include:

• One monthly payment covering all properties
• Lower total closing costs
• Release clauses enabling individual property sales
• You can add properties without loan renegotiation

The best part about blanket mortgages is their release clauses. You can sell individual properties without triggering due-on-sale provisions. This flexibility lets investors use sale proceeds to buy new properties while keeping the original loan structure.

Qualification Requirements

Getting a blanket loan means meeting specific criteria that differs between lenders. As of 2025, typical requirements include:

Down Payment:

• 25% to 50% of combined property value
• Better interest rates often come with higher down payments

Financial Prerequisites:

• Large real estate portfolio
• Strong credit history
• Substantial cash reserves
• Proven success in property management

Lenders review these key factors:

• How long you’ve owned properties
• Credit scores of all loan principals
• Industry experience and expertise
• Cash flow from existing properties
• Combined property values as collateral

Top Commercial Lenders

The leading commercial lenders in 2025 show different strengths in blanket loan offerings. Newmark leads the pack with loans exceeding $48.40 billion during the 12 months ending September 2024. CBRE and Walker & Dunlop follow right behind, together originating $61.40 billion in loans.

Recent market trends look promising:

• Loan originations jumped 44% in Q3 2024 compared to Q2
• Health-care property loans exploded by 510%
• Hospitality assets grew 99%
• Retail properties saw an 82% increase

Interest rates for blanket mortgages range from 4% to 11%, based on borrower risk assessment. Loan amounts can go up to $50 million, fitting various investment scales.

The market outlook for 2025 looks bright. Dropping interest rates create chances for property owners to refinance, which improves cash flow and builds stronger real estate portfolios. Lower borrowing costs might also boost real estate transactions and drive up property values.

Successful investors should:

• Keep strong debt service coverage ratios
• Build substantial cash reserves
• Show consistent property management success
• Build relationships with commercial lenders

Blanket loans work best for developers, builders, and long-term investors who want efficient portfolio management. This structure helps those handling multiple properties by offering simplified financing solutions while keeping portfolio flexibility.

Bridge Loans

Bridge financing helps investors fill significant gaps in real estate investment timelines and lets them act quickly to seize promising opportunities. These short-term loans last 6 to 24 months and give immediate access to capital when traditional financing moves too slowly.

Short-term Financing Options

Bridge loans come in two distinct varieties based on personal liability:

• Recourse loans that need personal guarantees
• Non-recourse loans backed only by property value

The best part about bridge financing is that funds arrive within 10 days after application. This makes a huge difference since traditional loan applications often take more than 30 days.

Bridge loans today work well for several investment needs:

• Property deals that need quick closing
• Renovation projects waiting for permanent financing
• Auction purchases that need immediate payment
• Distressed property opportunities

Bridge Loan Costs

Interest rates are higher than standard 30-year mortgages and range from prime rate to prime plus 2 percentage points. Borrowers in 2025 should expect:

• Down payments starting at 20%
• Closing costs between 1.5% to 3% of loan amount
• Interest rates from 6.99% to 8% based on credit profile

Lenders review several factors to set rates:

• Property’s value and condition
• Borrower’s investment experience
• Available equity in existing properties
• Exit strategy clarity

Using Bridge Loans Strategically

Bridge loans work best with careful planning and precise timing. These loans shine in specific situations:
Fix-and-flip projects benefit greatly from bridge financing. Investors can grab properties quickly, finish renovations, then sell or refinance into permanent financing.

Bridge loans give investors an edge at auctions where conventional financing doesn’t work. Quick funding helps them make competitive cash-equivalent offers.

Bridge loans also support several strategic moves:

• Property acquisition before selling existing ones
• Immediate property improvements
• Time-sensitive deals in competitive markets
• Gap coverage until permanent financing approval

Investors should follow these guidelines to get the most from bridge loans:

• Keep substantial equity in current properties
• Have clear exit strategies ready
• Show financial stability
• Build connections with reputable lenders

Bridge loans focus on asset value more than borrower creditworthiness. This asset-based approach speeds up approvals since lenders look at property potential instead of extensive personal financial documents.

Success with bridge loans depends on understanding what lenders want regarding:

• Property value and potential
• Renovation timelines
• Sales or refinancing plans
• Cash flow projections

Bridge loans usually come with interest-only payments during the term, while principal becomes due at maturity. This structure helps manage cash flow throughout the project, but needs careful planning for final loan repayment.

Comparison Table

Types of Rental Property Loans	Interest Rate (%)	Loan Duration (Years)	Key Features
Conventional Loan	4.5% – 6.5%	15-30	Requires 15% down payment, 20% recommended to avoid PMI. Fixed or adjustable rates available.
FHA Loan	4.0% – 6.0%	15-30	Lower down payments (3.5%), suitable for multifamily properties if one unit is owner-occupied.
Portfolio Loan	5.0% – 8.0%	5-20	Flexible terms, higher fees, and prepayment penalties. Often used for multiple properties.
Private Loan	6.0% – 12.0%	1-5	Flexible terms, quick approval, and low eligibility requirements. Often used by investors with poor credit.
DSCR Loan	5.0% – 8.0%	5-20	Based on debt service coverage ratio (DSCR), typically requires a DSCR of 1 or higher.
Hard Money Loan	9.0% – 14.0%	1-5	Fast approval, high interest rates, and fees. Ideal for short-term projects like flipping.
Commercial loan	5.0% – 10.0%	5-20	Complex, based on rental income, often used for large multifamily or commercial properties.
Bridge Loan	6.0% – 12.0%	1-3	Short-term financing for immediate needs, often used to bridge gaps in funding[Not explicitly listed but similar to hard money loans].

Notes:

• Interest Rates: These are general ranges and can vary based on lender, credit score, and market conditions.
• Loan Duration: The duration can vary significantly depending on the lender and specific terms agreed upon.
• Key Features: Highlighted features are not exhaustive but provide a general overview of each loan type.

Each loan type has its advantages and disadvantages, and the choice depends on the investor’s financial situation, property type, and investment strategy.

Conclusion

Real estate investors have more financing options today than ever. My research into eight rental property loans shows that each one fits different investment needs and strategies.

Traditional bank loans come with competitive rates but need strict qualification requirements. Property ownership becomes more available with FHA multifamily loans that offer lower down payment options. Portfolio loans adapt to unique situations, and private money loans help close deals quickly. DSCR loans look only at property cash flow. Hard money loans help you acquire properties fast, while blanket loans make it easier to manage multiple properties. Bridge loans fill vital timing gaps in the process.

Savvy investors align their financing with their goals and situation. Your credit score, down payment capability, and property type shape the best loan choice.

Understanding these loan requirements helps you make smarter investment decisions.

Success in real estate investing begins with the right financing strategy. Take time to think about your investment goals, timeline, and resources before you pick your rental property loan option.

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