The Best Rental Property Loans for Investors With Little Cash - CentZip

The Best Rental Property Loans for Investors With Little Cash

As a real estate investor, you know that finding financing for rental property can be challenging, especially when you have little cash for a down payment. While saving up enough for a sizable down payment on an investment property is ideal, it can take time.

If you’ve found a good deal on a rental property and want to act fast before it’s gone, a low or no down payment loan may be your best option to get started.

These types of loans allow investors to put down less upfront while still reaping the benefits of rental income and potential property appreciation. If you’re ready to start building your real estate portfolio but lack a lot of cash, explore these top loan options for investors that require little to no money down.

With the right financing in place, you can become a landlord and start generating monthly cash flow sooner rather than later.

Rental Property Loans: An Overview for Investors

As a real estate investor looking to purchase rental property with little cash on hand, you have several attractive loan options to consider:

Federal Housing Administration (FHA) Loans

FHA loans are insured by the FHA and allow down payments as low as 3.5%. They are a great option if you want to minimize your down payment. To qualify, you’ll need a minimum FICO score of 580 and a debt-to-income ratio below 50%.

VA Loans

If you’re a veteran or current service member, VA loans offer 100% financing with no down payment required. They also typically have lower interest rates than conventional mortgages. Eligibility depends on your length of service and duty status.

USDA Loans

USDA loans provide 100% financing for properties in designated rural areas. They require no down payment and have competitive interest rates. Your income must be below 115% of the median income for your area.

Conventional Loans

Conventional 97 and HomeReady mortgages allow 3% down payments. They require a 620 FICO score and 45% DTI or less. Although more stringent than government-backed loans, conventional mortgages typically have faster approval and funding.

In summary, with several low- and no-down payment mortgage options, financing your first rental property is within your reach as an investor, even with limited funds. Do your research, check your eligibility, and find a loan that matches your financial situation and investment goals. With the right financing in place, you’ll be well on your way to building a thriving rental property portfolio.

Qualifying for a Rental Property Loan With Little Money Down

To qualify for a rental property loan with little money down, you have several options to explore.

Federal Housing Administration (FHA) Loans

FHA loans only require 3.5% down and have flexible credit score requirements. However, they do charge mortgage insurance and have maximum loan amounts. FHA loans are a good option if you have limited savings but a steady income.

VA Loans

If you’re a veteran or active military member, VA loans require no down payment and no private mortgage insurance (PMI). They also have no maximum loan amount for most areas. VA loans can be an excellent choice with many benefits, especially if you have limited funds for a down payment.

Portfolio Lenders

Some portfolio lenders, like community banks and credit unions, may offer portfolio loans that only require 5-10% down for investment properties. They evaluate applications based more on your overall financial picture rather than just credit scores and DTI ratios. Portfolio lenders could be worth exploring if you have a relationship with a local bank.

Private Money Lenders

As a last resort, private money lenders offer short-term loans with higher interest rates, often not requiring a down payment. However, you’ll need enough equity and cash flow to pay off the loan quickly. Only consider private money lenders if other options are exhausted, as the fees and rates tend to be much higher.

In summary, with determination and an understanding of the options, it is possible to qualify for a rental property loan even with little money down. Do your research, check with multiple lenders, and be ready to provide details on your financials, experience, and investment strategy. Where there’s a will, there’s a way.

Types of Loans for Rental Properties

As an investor looking to purchase a rental property with little cash on hand, you have several loan options to consider:

Conventional Mortgages

A conventional mortgage is a traditional loan insured by private mortgage insurance companies, not the federal government. Down payments are typically 20% of the purchase price or more. However, some lenders offer low-down-payment conventional mortgages, with down payments as low as 3-5%. Interest rates may be slightly higher, and private mortgage insurance will be required until you reach 20% equity.

FHA Loans

Federal Housing Administration (FHA) loans are insured by the FHA and allow down payments as low as 3.5%. These are a good option if your credit score is below 700. Interest rates are usually a bit higher than conventional mortgages. You’ll need to pay mortgage insurance premiums for the life of the loan.

VA Loans

For eligible military members and veterans, VA loans offer 100% financing with no down payment and no private mortgage insurance (PMI) requirement. However, the property must meet certain standards and maximum loan amounts apply based on county limits. Interest rates are comparable to conventional mortgages.

Hard Money Loans

Hard money loans come from private individuals or groups instead of a bank or mortgage lender. They typically offer fast funding and more flexibility for those with lower credit or income. However, interest rates are usually much higher, loan-to-value ratios are lower, and the loan term is shorter, often 1-5 years. These loans should only be used when other options are not available.

In summary, for investors with little cash, the best options are likely low-down-payment conventional mortgages, FHA loans, or VA loans if you qualify. Compare rates and terms to determine what works best based on your situation. A hard money loan should only be considered as a last resort. With the right loan program and strategy, you can successfully finance a rental property even with limited funds.

Finding the Best Rental Property Loan Rates

When looking for the best rental property loan rates, there are several options to consider based on your current financial situation and investment goals.

Conventional Loans

Conventional loans are a popular choice for rental property financing. They typically offer competitive interest rates and down payment requirements as low as 20%. However, they do require good credit, usually a score of 620 or higher. If your score needs improvement, focus on paying down debt and limiting new applications before applying.

Hard Money Loans

Hard money loans provide short-term financing from private lenders. They have higher interest rates, around 8-15%, but require little documentation and can fund in days. Hard money loans are best for those with poor credit or who need to close quickly. You’ll need at least 25-30% down and should only use them for properties with a lot of “forced appreciation” to ensure a healthy profit.

Seller Financing

If purchasing from a private seller, you may be able to obtain seller financing, where the seller acts as the bank and provides you a mortgage to purchase the property. This allows for little or no down payment, flexible terms, and sometimes below-market interest rates. However, the seller must be willing to provide financing and you are at their mercy regarding the loan details. Discuss this option early in the purchasing process to allow time for proper documentation.


Real estate crowdfunding has become popular for raising capital from multiple private investors. You present your rental property investment opportunity to potential investors on a crowdfunding platform. If interested, they can contribute equity or debt to fund your purchase in exchange for a percentage of ownership or interest payments. This innovative approach opens doors for those struggling to obtain traditional financing. However, investment minimums are often $25,000 or more, and there are risks with relying on anonymous investors.

In summary, evaluate your own financial situation and investment goals to determine which rental property loan options match your needs. Do thorough research on the pros and cons of each to make an informed decision and maximize your long term success.

Tips for Getting Approved for a Rental Property Loan

To get approved for a rental property loan with little cash on hand, follow these tips:

Do your research

Learn the different types of rental property loans, like conventional mortgages, FHA loans, and hard money loans. Compare terms, rates, down payment and credit score requirements to find options you may qualify for. Check your credit score and credit report to make sure there are no errors before you start applying.

Make a solid plan

Have a clear plan for how you will repay the loan, including projected rental income and expenses. Provide details on the specific property you want to purchase, renovation needs and costs (if any), and your experience as a landlord. The lender will want to see that you have thought through all aspects of owning an investment property.

Build your down payment

While some loans allow down payments of 3-5% or less, the more you can put down, the better your chances of approval and the lower your interest rate. Save as much as possible. Also look into down payment assistance programs in your area.

Find a co-signer if needed

If your credit score or income isn’t quite up to par, ask a family member with good credit to co-sign the loan application. Be upfront that you need their help to qualify, and provide a plan to take over or refinance the loan in their name as soon as possible.

Ask about alternative options

Don’t assume a traditional mortgage is your only choice. Ask the lender about hard money loans, private lenders, crowdfunding, or seller financing which may have more lenient qualification standards. You’ll likely face higher interest rates, but it can be a way to get your foot in the door as an investor.

With determination and the right strategy, you can get approved for a rental property loan, even with little cash. Do your homework, make a solid plan, build your down payment, and explore all available options. With the right loan in place, you’ll be well on your way to becoming a successful real estate investor.


To summarize, there are options available if you want to purchase an investment property but lack a large down payment. With interest rates still near historic lows, now is an opportune time to obtain a low-cost loan and get started with real estate investing. By exploring alternative lending sources and loan options like those discussed here, you can find a solution that matches your financial situation.

While the path may not always be straightforward, with determination and persistence you can achieve your goal of owning cash-flowing rental property. The key is starting your search, crunching the numbers, and finding the right lender and loan for your needs. With the potential rewards of real estate investing, the effort will be well worth it.

Leave a Comment