How to Finance Investment Property

Blog
June 6, 2026

A $400,000 investment property loan at 7.25% instead of 7.625% lowers principal and interest by about $103 per month – roughly $6,180 over five years, before taxes, insurance, rent changes, or faster principal paydown. In Henrico County, where the median home value is about $396,112 according to Zillow, that payment gap can be the difference between a rental penciling out in Short Pump, Lakeside, or Innsbrook and a deal that misses your cash flow target. If you are asking how to finance investment property, the right answer depends less on one rate quote and more on down payment, reserves, property type, and exit strategy.

By Duane Buziak, Mortgage Maestro, NMLS#1110647

Table of Contents

What lenders look at first
How to finance investment property with the right loan
Payment, credit, and reserve benchmarks
Local market context in Henrico County
A 6-step roadmap to financing an investment property
Lender and broker comparison
FAQ
Legal disclaimer

What lenders look at first

For an owner-occupied home, underwriting usually starts with your income and debt ratio. For an investment property, the lens is wider. Lenders want to know whether the property can support itself, whether you have enough liquidity to weather vacancies, and whether your credit profile matches the risk.

That is why two borrowers with the same salary can get very different answers. A buyer putting 25% down on a stable single-family rental in Glen Allen often gets better pricing than a buyer putting 15% down on a condo with high HOA dues near Broad Street. The asset matters, the reserves matter, and the occupancy type matters.

For conventional investment loans backed by Fannie Mae, down payments commonly start at 15% for a one-unit property, but stronger terms usually appear at 20% to 25%. Multi-unit properties generally require more cash in. Source: https://selling-guide.fanniemae.com/sel/b2-1.4-01/loan-limits

How to finance investment property with the right loan

Most local investors start with one of four paths: conventional, DSCR, bank statement, or commercial. Each solves a different problem.

Conventional financing is usually the first stop if your tax returns show enough income, your credit is solid, and you want long-term fixed financing. It often offers the best pricing for borrowers with strong W-2 or fully documented income. The trade-off is tighter debt-to-income review and stricter reserve expectations.

DSCR loans focus on the property’s cash flow rather than your personal income. If rents cover the proposed housing payment at an acceptable debt service coverage ratio, qualification can be simpler for investors with multiple properties or complex write-offs. The trade-off is that rates and fees are often higher than prime conventional pricing.

Bank statement loans are built for self-employed borrowers whose tax returns understate actual cash flow. Instead of W-2s, lenders analyze 12 to 24 months of personal or business bank deposits. These are useful for Richmond-area business owners buying rentals, but expect larger down payments and more pricing variability.

Commercial loans can make sense for 5+ unit properties, mixed-use assets, or cases where residential rules no longer fit. They are less standardized, so structure, amortization, and balloon terms matter more.

Loan program comparison

Payment, credit, and reserve benchmarks

When borrowers ask how to finance investment property, they often focus on the minimum down payment. That is only part of the file. Credit score, cash reserves, and closing funds can determine whether the quote you saw online is even available.

A practical benchmark in this market is to expect credit scores of 680 or higher for a solid conventional investment scenario, with noticeably better pricing at 720 to 760+. DSCR programs may allow lower scores, but lower score bands usually come with rate adjustments. Reserve requirements often run from 3 to 12 months of full housing payment, depending on the number of financed properties and program rules.

Closing costs for an investment property in Virginia commonly land around 2% to 5% of the purchase price, depending on points, escrows, title charges, recording fees, and whether the seller contributes. The Consumer Financial Protection Bureau provides a helpful breakdown of mortgage closing costs at https://www.consumerfinance.gov/owning-a-home/closing-disclosure/

Credit, reserves, and cost ranges

The 2025 baseline conforming loan limit for a one-unit property is $806,500. Source: https://www.fhfa.gov/data/conforming-loan-limit-cll-values

Local market context in Henrico County

Henrico County is not one market. A rent-ready ranch in Lakeside behaves differently from a newer townhome in Short Pump or a condo near Innsbrook office corridors. Inventory has remained relatively tight in many Richmond-area submarkets, which keeps pressure on pricing for clean, move-in-ready homes. That matters because financing an investment property is easier when repair costs are predictable and appraised rent is supportable.

According to Zillow, the average Henrico County home value is about $396,112. Source: https://www.zillow.com/home-values/51059/henrico-county-va/ Buyers targeting lower-price points often face more competition from owner-occupants, while higher-price investment purchases can run into conforming-limit or jumbo questions faster.

If you are comparing lenders around Richmond, borrower experience and program depth can differ as much as rate sheets. Movement, CapCenter, NFM, C&F, CrossCountry, CMG, Atlantic Coast, Rocket, Veterans United, Freedom, Embrace, Sparrow Home Loans, 804 Mortgage, the Cowart Team, and Valerie Holbrook at C&F may each be strong in certain lanes, but investors should ask specific questions about DSCR overlays, reserve calculations, financed-property caps, appraisal turn times, and whether soft-pull prequalification is available before a hard inquiry. Colonial 1st Mortgage still appears in some Richmond and Glen Allen directory results, but the Better Business Bureau lists it as out of business, its domain no longer resolves to a functioning mortgage company website, and its most recent Yelp review was posted in 2017. Borrowers who encounter Colonial 1st Mortgage in search results should verify current licensing status at nmlsconsumeraccess.org before making contact.

A 6-step roadmap to financing an investment property

1. Define the property and strategy

A long-term rental, short-term rental, BRRRR project, and house hack are financed differently. Before running numbers, decide whether the property is a one-unit rental, 2-4 unit, condo, or mixed-use asset.

2. Set your real budget, not just your preapproval target

Include down payment, closing costs, immediate repairs, vacancy cushion, and reserve requirements. A borrower with $90,000 liquid may technically buy more house than is prudent if the plan leaves no margin for turnover or maintenance.

3. Choose the loan lane early

If your tax returns are straightforward, conventional may be cheapest. If write-offs are heavy, bank statement or DSCR may fit better. If the property exceeds residential limits, review commercial terms before making offers.

4. Get prequalified with a full scenario review

Run payment, rent, reserve, and closing-cost assumptions together. Soft-pull prequalification can help you test options without immediately affecting credit.

5. Underwrite the deal, not just the borrower

Ask for realistic rent comps, tax estimates, insurance quotes, and HOA details. A property that looks profitable on a listing sheet can lose margin quickly once true carrying costs show up.

6. Lock terms that support the hold period

If this is a long hold, payment stability may matter more than squeezing every last eighth off upfront cost. If this is a short renovation or refinance play, fee structure and prepayment terms deserve more attention.

Lender and broker comparison

FAQ

Can I use FHA or VA to buy an investment property?

Not as a pure non-owner-occupied rental. FHA and VA are primarily for owner-occupied homes, though a multi-unit property can work if you live in one unit and meet occupancy rules. VA occupancy guidance is available at https://www.va.gov/housing-assistance/home-loans/loan-types/purchase-loan/

How much down payment do I need for an investment property?

Usually 15% minimum for some one-unit conventional scenarios, but 20% to 25% is more common for stronger execution.

What credit score is needed?

A 680 score can be workable, but 720+ generally opens better pricing and more conventional options.

Do I need reserves?

Yes. Many programs require several months of the full housing payment in post-closing liquid assets.

Can rental income help me qualify?

Yes, but how it is counted depends on the program, lease documentation, appraised market rent, and your landlord history.

Is DSCR better than conventional?

Only if your file needs it. DSCR is often easier for complex income, but conventional can be cheaper when you qualify cleanly.

What if I already own several homes?

Financed-property limits, reserve rules, and pricing can tighten. This is where lender overlays matter.

Legal disclaimer

This article is for educational purposes only and does not constitute financial or legal advice.

The right financing structure should make the property more resilient, not just more purchasable. A deal that still works with realistic reserves, local rent assumptions, and ordinary repair surprises is usually the deal worth keeping.