The Quick Read: On a rental purchase you won’t live in, conventional financing generally caps at 85% loan-to-value (LTV) for one unit and 75% LTV for two to four units, per Freddie Mac’s guide. Your actual loan is the smallest of that cap, the conforming loan-size ceiling, and what your income can carry.
- The down payment is the mirror of the cap: about 15% on a one-unit rental and about 25% on a two- to four-unit rental.
- Conventional underwriting counts only 75% of the rent, then subtracts the full monthly payment, so a rental can cash-flow and still shrink your loan.
- The baseline conforming ceiling for a one-unit loan is $832,750, and high-cost counties reach $1,249,125, per HousingWire.
- Investors who outgrow those tests often move to a DSCR loan, which sizes the loan on the property’s rent against its payment instead.
What Are the Three Limits on a Conventional Investment Loan?
Your maximum loan is the lowest of three numbers: the leverage cap for the property type, the conforming dollar ceiling, and the amount your income and the rent can support. Most investors only look at the first one. The other two are where deals get trimmed.
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Rate source: Freddie Mac 30-yr average via FRED® — Federal Reserve Bank of St. Louis · effective Oct 29, 2026
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As of Oct 29, 2026 · General Freddie Mac market benchmark, not a Lendmire loan offer. Rent, nightly rate, occupancy, taxes, and insurance are editable estimates. Short-term rental figures are estimates only and vary significantly by season, property type, management approach, and local short-term-rental rules — confirm local regulations before relying on them. Qualifying income for short-term rentals varies by program — some use appraisal market rent, others use documented STR history or projections — and is confirmed in underwriting. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
Start with the leverage cap. The table shows the purchase caps on a rental you will not occupy.
| Property | Max LTV on purchase | Approx. minimum down |
|---|---|---|
| 1-unit investment | 85% | About 15% |
| 2- to 4-unit investment | 75% | About 25% |
Both Freddie Mac and the Fannie Mae eligibility matrix publish these purchase caps. LTV is the loan amount as a percentage of the property’s value. The minimum down payment is simply 100% minus the cap.
Cash-out refinances sit lower. Freddie Mac caps a cash-out refinance on a one-unit investment property at 75% LTV, and the Fannie Mae matrix shows 75% for limited cash-out refinances on one- to four-unit investment properties. Multi-unit cash-out generally runs tighter still.
Freddie Mac also rounds the LTV up to the next whole number. A loan that works out to 85.01% is treated as 86%, which fails the cap. On a tight file that rounding matters.
The appraisal can shrink the loan
On a purchase, the cap applies to the lower of the contract price or the appraised value. Say you contract a one-unit rental and the appraisal lands 5% under the price. The lender sizes the loan off the lower number, and you cover the gap in cash. The cap is a percentage of what the property appraises for, not what you agreed to pay.
The dollar ceiling
Conventional loans must also fit under the conforming limit. The baseline one-unit limit is $832,750, and the ceiling in high-cost areas is $1,249,125, per HousingWire’s coverage of the annual limit announcement. Loans above the local limit are jumbo and fall outside the conventional framework. On a pricey rental in a baseline-limit county, the ceiling can cut the loan below what the percentage cap would allow.
How Does Conventional Underwriting Count Rent?
It counts 75% of the gross monthly rent, subtracts the property’s full monthly payment (principal, interest, taxes, insurance, and any HOA dues, known as PITIA), and treats the result as net rental income. That number can be negative. Fannie Mae’s own job aid for entering rental income lays out the 75% step and notes the lender calculates it by hand.
Run it as a ratio. Suppose the full rent is 1.3 times the full payment. Seventy-five percent of that is 0.975 times the payment, so the property shows a small shortfall on paper even though the rent covers the payment with room to spare. That shortfall is added to your other monthly debts.
Then comes the second test, debt-to-income (DTI), which compares all your monthly debts to your documented personal income. A conventional lender is sizing the loan on you and the property together. A borrower with strong employment income and a handful of other mortgages can hit the DTI ceiling long before the LTV cap.
Documents follow the same pattern. A purchase uses the appraiser’s market rent schedule, which is Form 1007 for a one-unit and Form 1025 for two to four units. An existing rental is documented with leases or tax returns, and a lender often wants proof you have collected rent before or have property-management experience.
What Cash Do You Need Beyond the Down Payment?
Plan on the down payment, closing costs, and post-closing reserves, which are months of payment you must still hold in the bank after closing. Conventional investment loans require reserves, and the requirement grows as you finance more properties. The exact month counts live in the lender’s guide, so confirm them with whoever is quoting your file.
Two cost features are specific to leverage. Loans above 80% LTV need mortgage insurance, which on a rental means the 80.01% to 85% band on a one-unit. Pricing adjustments also climb as the LTV goes up and the credit score goes down. Putting 15% down is allowed, but it is rarely a more affordable way to do it. Final terms depend on the lender’s guidelines, the property type, and the borrower’s complete credit picture.
The 20% figure you hear everywhere is mostly the line for avoiding mortgage insurance. It is not a universal rule. The low-down-payment conventional programs, including the 3% options, require you to live in the property, so they do not apply to a true rental.
Where Does the Conventional Rule Break?
The cap is not the only way a conventional loan stops working. These are the edge cases that show up most often.
- Property count. Fannie Mae’s Selling Guide limits second-home and investment transactions to 10 financed properties under its automated underwriting. The rule counts properties, not loans, and a duplex counts as one. Individual lenders often set tighter limits of their own.
- House hacking. A two- to four-unit property where you live in one unit is financed as a primary residence, with far higher leverage than a pure rental. That is a different product from an investment loan, and it requires you to actually occupy the property.
- Larger buildings. Five or more units fall outside the one- to four-unit conventional rules entirely.
- Entity ownership. Conventional loans lend to individuals. Holding the property in an LLC is a DSCR-side option, subject to lender program eligibility.
- Ineligible property types. Manufactured homes (single- and double-wide), log homes, and barndominiums are not offered in the DSCR network, so they are not a fallback for a rejected conventional file.
Why Do Rental Buyers Move to a DSCR Loan?
Because a DSCR loan skips the personal-income test and the 75% haircut, and sizes the loan on the property’s own numbers. DSCR stands for debt service coverage ratio, which is the monthly rent divided by the full monthly payment (PITIA). A DSCR file qualifies primarily on property-level rental income covering the payment, subject to lender guidelines, so your DTI does not have to cooperate.
Lendmire is a DSCR-focused mortgage broker that arranges investor loans through select lenders in its wholesale network across 41 markets, including Washington, D.C. Lendmire does not lend directly. Across that network, the common ranges look like this, and every figure is subject to lender guidelines.
| Factor | Conventional | DSCR (wholesale network) |
|---|---|---|
| Loan sized on | Your income, DTI, 75% of rent | Rent versus PITIA |
| Investment purchase LTV | 85% (1-unit), 75% (2-4 unit) | Typically 75%-80% |
| Cash-out LTV | 75% on a 1-unit | Around 75% on standard rentals |
| Loan size | Under the conforming ceiling | Roughly up to $3,000,000 |
Look closely at the first LTV row, because it shows the honest trade-off. On a one-unit rental purchase, conventional can actually lend more than most DSCR programs. Select high-leverage DSCR programs reach 85% LTV on a purchase, generally with a score of roughly 700 or higher. On a two- to four-unit purchase, the two leverage levels line up closely, and the difference becomes the income test.
The numbers behind the DSCR side
Coverage of 1.00 is where select programs start, a floor for specific programs rather than a universal standard. A separate select-lender path takes coverage below 1.00, with leverage and terms adjusted. Stronger ratios open better pricing and leverage.
Credit works in tiers. A 620 floor exists in parts of the network, most programs want around 660, and 700 or higher unlocks the strongest leverage. Reserves vary by lender, leverage, loan size, and transaction type, commonly around 6 months of PITIA. Conservative rate-and-term refinances at modest leverage under $1,500,000 can see reserves waived, while loans above that size typically step up to about 9 months. Above $2,500,000, the network generally holds to 30-year fixed structures. Extended terms, interest-only periods, and adjustable structures are available through select lenders for investors who want them.
Seasoning, the waiting period a lender wants after you buy before it will refinance, is about 6 months on most cash-out files.
One clarification protects you from a common mistake. A DSCR compares rent to PITIA only. Clearing 1.00 does not mean the property produces positive cash flow, because repairs, vacancy, management, utilities, and capital expenses sit outside the calculation. The ratio decides whether the loan fits. Your own budget decides whether the deal is good.
Short-term rentals follow a separate rulebook. Purchases go to 75% LTV with about 12 months of hosting history and a 640-plus score, and cash-out comes in lower. Lendmire’s piece How Much a Short-Term Rental DSCR Loan Lends on a Paid-Off Property covers that structure. Short-term rental rules can vary by city, county, HOA, and property type, so investors should confirm local rules before relying on projected rental income. The complete DSCR loans guide walks through the whole program in order. Each figure is subject to lender guidelines and a complete review of property type, leverage, and credit.
What Does the Decision Look Like in Practice?
Pick the loan whose binding limit you can live with. Picture three investors.
The first has strong employment income and is buying a one-unit rental with a clean appraisal. Conventional may lend the most here, up to 85% LTV, and the pricing may reward the strong profile. It is the natural first look. Leverage, reserves, and pricing vary by lender and program; the final terms follow the full file review.
The second is buying a duplex. The conventional cap is 75% LTV, and DSCR typically allows 75%-80% on an investment purchase, so leverage is similar. Now the question is the income test. If the 75% rent haircut and existing debts push DTI over the line, a DSCR loan sizes the same duplex off the rent alone.
The third already finances several rentals and is nearing the 10-property count. Conventional is about to stop, and the property-level test of a DSCR loan keeps the portfolio growing. Expect the trade-off: DSCR files typically cost more up front and often carry a prepayment structure. Run both before you assume either.
A larger down payment helps either path. It lowers the monthly payment and can lift the coverage ratio. It never erases the leverage caps, credit floors, reserve rules, or property eligibility. The strongest files clear both tests: enough equity and enough rental coverage. Tax treatment varies; consult a qualified tax professional about how your financing choices affect your return.
Key Terms Defined
Loan-to-value (LTV): The loan amount divided by the property’s value, shown as a percentage.
Conforming loan: A conventional loan that fits the agency guidelines and stays under the annual dollar limit.
Non-owner-occupied: A property you do not plan to live in, which is how a rental is classified.
PITIA: The full monthly payment of principal, interest, taxes, insurance, and any HOA dues.
Debt-to-income (DTI): Your total monthly debts divided by your documented monthly income.
Reserves: Months of payment you must hold in liquid funds after closing.
DSCR: Monthly rent divided by PITIA, used to judge whether a rental covers its own payment.
Frequently Asked Questions
How much do you have to put down on a conventional loan for a rental?
About 15% on a one-unit investment property and about 25% on a two- to four-unit property, mirroring the 85% and 75% LTV caps. Many investors put down more because pricing and mortgage insurance improve as leverage drops. A lender can also set its own tighter minimum than the baseline. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
Can I use a 3% down conventional program on a rental?
No. The low-down-payment options require you to live in the property. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
Does the conforming limit apply to investment properties?
Yes. A conventional loan on a rental must stay under the local conforming ceiling, or it becomes a jumbo loan outside the conventional framework. The baseline one-unit limit is $832,750, and high-cost areas go up to $1,249,125.
Why can a conventional lender approve me for less than the percentage cap?
Because the LTV cap is only one of three limits. The conforming ceiling and your DTI, which includes the shortfall from counting only 75% of the rent, can each bring the loan below the cap.
Does a DSCR loan allow a higher loan amount than conventional?
It can, on larger balances. Standard DSCR programs run roughly up to $3,000,000, and the loan is sized on the property’s rent against its payment. On leverage, a one-unit purchase can still go higher conventionally, so the answer depends on the property, your credit profile, and lender guidelines.
Next Step
If you are buying or refinancing a rental property and want to see how the numbers work, Lendmire can help you compare DSCR loan options based on the property income, credit profile, leverage, and investor goals. Programs change, every file is underwritten individually by the lender, and nothing here is a commitment to lend.
About Lendmire
A non-QM mortgage broker (NMLS# 2371349), Lendmire arranges DSCR financing for real estate investors in 41 markets — 40 states plus Washington, D.C. Because deals are underwritten primarily on property cash flow rather than personal income documentation, the structure suits self-employed buyers and entity-owned portfolios. Lendmire places loans through wholesale investor lenders; it is not a direct lender. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. Freddie Mac Seller/Servicer Guide §4203.1
2. HousingWire: Conforming Loan Limit Coverage
3. Fannie Mae Eligibility Matrix
This article is part of Lendmire’s DSCR loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How Much a DSCR Lender Lends on an Auction Property Won Under Value · How Much a DSCR Refinance Lends After a BRRRR Rehab · How Much a DSCR Loan Lends After a Low Appraisal on a Cash Buy
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosures. The information presented in this article is general market commentary, not financial, legal, or tax advice. Lendmire is a mortgage brokerage (NMLS# 2371349) — not a direct lender or depository institution — and loan placement is subject to lender underwriting. Nothing in this content represents a commitment to lend. Loan terms, pricing, and program availability vary based on borrower qualifications, property characteristics, and state of subject property, and are subject to change at any time. Lendmire complies with Equal Housing Opportunity requirements. Consumer access: nmlsconsumeraccess.org.