Can You Roll Closing Costs Into an Investment Property Conventional Loan?

The Quick Read: It depends on whether you are buying or refinancing. On a purchase, you generally cannot add closing costs to the loan, because the loan is capped as a percentage of price or value and the costs sit outside that cap. On a refinance, costs can often be built into the new balance, as long as the total stays under the cap.

Which Situation Are You In?

The internet disagrees on this question because the answer changes with the transaction. Here is the map.

Three different tools get lumped together as “rolling in.” They are not the same thing:

• Adding to the balance. The costs become part of the new loan.
• A seller credit. The seller pays some of your costs at closing.
• A lender credit. The lender covers some costs, and you accept a higher interest rate in exchange.

Most of the confusion comes from people using one phrase for all three.

Why a Purchase Loan Can’t Absorb Closing Costs

Start with the leverage cap. On a one-unit investment property, conventional purchase financing tops out at 85% of the price or appraised value, whichever is lower. On a two- to four-unit investment property, the cap is 75%. These figures come from the standard conventional programs, subject to lender guidelines and full file review.

Compare that with a home you live in. A principal residence can reach 97% for a first-time buyer on one unit, or 95% otherwise. A second home reaches 90%. Occupancy decides the leverage, and an investment property gets the tightest limits.

Here is the mechanical problem. The cap is a ceiling on the loan, not a starting point. If you buy a one-unit rental at 85% leverage, the loan is already at the ceiling. Closing costs cannot sit on top of it. You bring the 15% down payment and the closing costs in cash. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.

Picture a buyer who finds a one-unit rental and wants the maximum loan. The lender sets the loan at 85% of the lower of price or appraisal. Everything else is on the buyer’s side of the table: the down payment, the lender and title charges, and the prepaid items. A buyer who wanted to finance costs would have to borrow less than the maximum to make room. That defeats the point.

Appraisal adds a wrinkle. If the property appraises below the contract price, the lender uses the lower value. The maximum loan shrinks, and the cash you bring grows. Ask for a quick read on the appraisal risk before you count on a particular cash-to-close number.

What a Refinance Can Do That a Purchase Can’t

On a refinance, the new loan pays off the old one. Across the wholesale programs Lendmire places files with, the new balance on a rate-and-term refinance can usually include the payoff and the closing costs, provided the total stays under the leverage cap. The same idea applies on the principal-residence side of the market, where a rate-and-term loan pays off the existing first mortgage and the closing costs, with only incidental cash back.

Investment property carries a lower cap than a home you live in. Financed costs therefore eat into your equity cushion faster. If your equity is thin, there may be no room left under the cap.

A cash-out refinance works differently. Conventional cash-out on investment property is capped at 75% of value. Costs can come out of the new loan, but each dollar you finance is a dollar of equity you no longer have. Two seasoning rules also apply. The mortgage being paid off must be at least 12 months old, and you must have been on title for 6 months. Delayed financing is the named exception for buyers who paid cash. Can You Roll Closing Costs Into a Conventional Loan? walks through the owner-occupied version of the same mechanics.

For a complete view of what each of Lendmire’s conventional loan programs asks of a file, start with the program page. Details vary by lender.

Can the Seller Pay Instead?

A seller credit is the most common substitute on a purchase. It works, but the limits are tight on investment property.

Freddie Mac publishes a financing concession limit table that sets one flat, low percentage for investment property at every leverage tier. Owner-occupied homes get larger allowances as the down payment grows. Investors do not.

Three rules shape how seller credits behave:

1. The credit is tested first. Anything above the allowed limit is treated like a price reduction. The lender lowers the price used for leverage and recalculates, which can shrink your maximum loan.

2. The credit cannot exceed your actual costs. A credit bigger than your closing costs does not become cash in your pocket.

3. The credit cannot fund your down payment. It can offset costs. It cannot stand in for your own money.

The credit must also be documented and shown on the closing paperwork. Your file will list who paid what.

One carve-out is worth knowing. Under a 2024 Fannie Mae notice, buyer-agent commissions paid by the seller under local custom are not counted toward those limits. That makes commissions a separate question from ordinary closing costs.

Lender Credits: Cash Now, Cost Later

A lender credit is not a seller credit. The lender covers part of your closing costs, and you take a higher interest rate in return. Your cash at closing drops. Your monthly cost rises for as long as you keep the loan.

The Consumer Financial Protection Bureau explains that credits lower closing costs now but cost more over time. That matches what brokers see across files. A longer hold shrinks the appeal of a lender credit. A shorter hold makes it more attractive.

An earlier version of Fannie Mae’s interested party contribution guidance said a lender credit funded by premium pricing is not counted as a seller-style contribution. The agency has since reworked the lender-incentive rules, so ask your lender how the credit is treated today.

You will not find an exact price for a lender credit here, and for good reason. It varies by lender, loan, and file. Your Loan Estimate shows lender credits as a negative number, so you can compare offers line by line.

What Rolling In Does to Your Deal

Think about three effects.

Cash to close. On a purchase, plan on the down payment plus all closing costs in cash. A seller credit trims that, within its small limit.

Monthly budget. A larger balance from financed costs on a refinance raises the payment. A lender credit raises it through a higher interest rate. Either way, you swap cash today for cost over time.

Equity. Investment property has tighter leverage than a home you live in, so financed costs use up a bigger share of your room. A two- to four-unit property has a tighter cap than a one-unit property.

If you buy rentals, cash is also your safety net for repairs and vacancy. Spending it all at closing has a price. Financing costs on a refinance has a price too. Neither choice is free.

Key Terms Defined

Loan-to-value (LTV): the loan amount divided by the lower of price or appraised value, shown as a percentage.

Closing costs: the one-time fees to finish a loan, including lender, title, and appraisal charges, plus prepaid items.

Seller credit (interested party contribution): money the seller or another party with a stake in the sale pays toward your costs.

Lender credit: money the lender applies to your costs in exchange for a higher interest rate.

Limited cash-out (rate-and-term) refinance: a new loan that pays off your existing mortgage and little more, with only incidental cash back.

Cash-out refinance: a new loan larger than your payoff that returns the difference to you.

Seasoning: the minimum time you must own the property or hold the current loan before certain refinances are allowed.

Mortgage insurance: coverage that protects the lender when your leverage is above 80%. It can be cancelled at 80% on request and ends automatically at 78%.

Common Mistakes

Assuming costs fold into any mortgage. On a purchase, they must fit under the cap, and the cap on investment property is lower than on a home you live in. As Fannie Mae’s Eligibility Matrix shows, the limits step down as occupancy moves from primary residence to second home to investment.

Negotiating a big seller credit. Anything above the allowed amount can be treated as a price cut for leverage purposes. You may gain nothing and lose loan size.

Treating lender credits as free. They are paid for through your interest rate.

Calling the property a primary residence to get better terms. Occupancy is a risk and quality-control focus for lenders. Misstating it can cause serious problems. If you will live in the home, owner-occupied terms apply. If you will not, they do not.

Mixing up refinance types. Rate-and-term and cash-out loans have different caps and seasoning rules. Ask which one your plan fits.

Questions to Ask Your Loan Officer

• Is this a purchase, a rate-and-term refinance, or a cash-out refinance under your program?
• What is my leverage cap on this property type and unit count?
• What is the maximum seller credit, and what happens above it?
• Can closing costs be added to the new balance on this refinance?
• What would a lender credit do to my interest rate and my long-run cost?
• Will mortgage insurance apply at my leverage, and when does it end?
• If the appraisal comes in low, how much more cash do I bring?

Compare your answers against the Loan Estimate comparison guide from the CFPB, which points you to origination charges, lender credits, and cash to close.

If you plan to live in part of the property, or you want a vacation home, the leverage is different. Lendmire’s article on second-home buyers and closing costs covers that lane.

Your Next Step

If you are buying a home and want to see whether a conventional loan fits your file, Lendmire can help you compare the options and what each one asks of the file. Every program figure here is subject to lender guidelines and full file review, and nothing here is a commitment to lend.

For your own numbers, request a scenario review with Lendmire.

About Lendmire

Lendmire, NMLS# 2371349, is a mortgage brokerage with consumer lending licenses in 16 states. FHA, VA, conventional and jumbo purchase and refinance loans are arranged through wholesale lending partners, and each application is reviewed individually by the lender. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.

References

1. Freddie Mac Guide Section 5501.6

2. CFPB lender credits and points

3. Fannie Mae Selling Guide B3-4.1-02, earlier version

4. Fannie Mae Eligibility Matrix

5. CFPB: Compare Loan Estimates