Conventional Loan for Investment Property: 2026 Rules and Costs

The rules on one page

The search results for this topic on October 10, 2026 are mostly forum threads, broker pages and lender explainers that list ranges for down payment, credit and reserves without the rule behind each number and without the cost. The rules are published. Fannie Mae’s Selling Guide (published October 7, 2026), its Eligibility Matrix (August 5, 2026) and LLPA Matrix (September 30, 2026), and Freddie Mac’s Single-Family Seller/Servicer Guide set what a lender can sell to the two agencies, and a lender that wants to sell the loan has to follow them. We read them on October 10, 2026 and saved the pages. This page does not repeat the comparison with DSCR loans or the rate tables: for those see DSCR loan vs conventional mortgage and investment property mortgage rates, and for the full map of loan types see the investment property loans guide.

Fannie Mae and Freddie Mac rules for an investment property, read October 10, 2026

Two points in that table change how people plan. First, an investor has no manual-underwriting route to an exception: if the automated system does not return an approval, there is no conventional loan to argue for. Second, the agencies are not identical. Freddie Mac’s table lets a one-unit investment property refinance without cash out go to 85%, where Fannie Mae’s limited cash-out refinance stops at 75%; both stop at 75% and 70% with cash out. The rest of this page works through each rule, then the price, then what 2025 lending looked like.

Down payment: 15% or 25%, and who uses the maximum

The Eligibility Matrix gives the maximum loan-to-value ratio by occupancy, units and purpose. For an investment property:

Maximum loan-to-value for an investment property, with the minimum down payment on a $400,000 purchase (our arithmetic)

Above 80% loan-to-value, the lender also needs mortgage insurance: Fannie Mae’s Selling Guide requires a primary mortgage insurance policy for a conventional first mortgage with an LTV ratio “greater than 80%” (B7-1-01). That cost is separate from the LLPA and is not in any table on this page.

Whether borrowers use the headroom is a different question, and HMDA answers it. We took the investment-property loans that Fannie Mae or Freddie Mac bought in 2025 and measured their combined loan-to-value against the cap for each type:

Investment-property loans bought by Fannie Mae or Freddie Mac in 2025, against the maximum loan-to-value

The caps bind. Almost no agency-bought two- to four-unit purchase went above 75%, and essentially none of the one-unit cash-out refinances did (0.0% rounded). On one-unit purchases, where 85% is allowed, 28% went above 75%, 4.1% above 80% and 0.1% above 85%: most investors who use an agency loan put 20% or more down even when the rule says 15%. HMDA’s ratio is the combined loan-to-value, so a second lien is included; the refinance row shows 3.8% above 75% because Freddie Mac’s one-unit limit is 85%.

Credit score: no floor in the guides, a price in the matrix

The score that Fannie Mae’s rules print is a manual-underwriting number: Selling Guide B3-5.1-01 (April 22, 2026) says the minimum for manually underwritten loans is 620 for fixed-rate loans and 640 for ARMs, and then, for the path an investor must use, that “A minimum credit score is not required for DU loan casefiles.” The LLPA Matrix’s change log records the move: on November 17, 2025 (Announcement SEL-2025-09), Fannie Mae “Removed reference to minimum required credit score of 620 for loans submitted to DU.” For an Accept Mortgage, Freddie Mac’s Loan Product Advisor assesses the borrower’s credit reputation itself, and its Guide limits the case where a borrower has no usable score to a one-unit primary residence (5201.1).

So the agencies do not tell you a number, and the number you meet is the lender’s. HMDA does not have it: the public file lists which credit-scoring model was used, not the score (our reading of the field list), and this page does not guess a number. What the agencies do publish is the price of a lower score. At 70.01% to 75% loan-to-value, the credit-score adjustment on a purchase runs from 0% (780 or higher) to 2.125% (639 or lower), and the investment-property line adds 2.125% to every row:

Fannie Mae purchase LLPA at 70.01% to 75% loan-to-value, investment property, by credit score (September 30, 2026)

The investor line is the same for every score; the score adjustment decides whether the total is 2.1% or 4.3%. On a $300,000 loan that is a spread of $6,375 to $12,750 in points.

Reserves: six months, plus a share of everything else you owe

For an investment property, Desktop Underwriter requires six months of reserves, measured in months of the qualifying payment on the new loan (based on PITIA, the full monthly housing payment). If you own other financed properties, Fannie Mae adds a percentage of the unpaid principal balance (UPB) of the mortgages and HELOCs on those other properties, excluding the subject property and your principal residence:

Extra reserves for other financed properties (Selling Guide B3-4.1-01)

A worked example, ours: you are buying a rental with a $2,300 monthly PITIA. You also have your own mortgaged home and two investment properties with mortgages of $250,000 and $180,000. That is four financed properties, so 2% applies to the $430,000 on the two rentals: $8,600. Six months of the new payment is $13,800. The reserve requirement is $22,400 (our arithmetic), after the cash to close. Fannie Mae’s own six-property example in B3-4.1-01 arrives at $18,457.

Not everything counts. Reserves cannot include “cash proceeds from a cash-out refinance transaction on the subject property,” personal unsecured loans or non-vested funds, while vested retirement funds, stocks and bonds can, and “Eligible gift funds (but not gifts of equity) may be used to satisfy reserve requirements” (B3-4.1-01). Freddie Mac adds a rule that only applies to investors: pooled funds are not an eligible source for an Investment Property Mortgage (4201.13). If you apply for several loans at once, the same assets can cover each; reserves are not cumulative.

How many properties: the limit of 10 and what counts toward it

Fannie Mae’s table for “Second home or Investment property” reads “DU - 10” (B2-2-03). The count is by property, not by loan, and it includes:

• one- to four-unit residential properties where you are personally obligated on the mortgage, even if the payment is excluded from your debt-to-income ratio;
• a two-unit building counts as one property;
• your principal residence if it is financed;
• every borrower on the loan, with jointly financed properties counted once.

Commercial real estate, multifamily buildings of more than four units, timeshares, vacant lots and chattel-titled manufactured homes do not count. Fannie Mae’s own example for the LLC case: a borrower buying a second home, with a financed principal residence and four two-unit investment properties financed in the name of an LLC in which they own 50%, is not personally obligated on the LLC’s mortgages, so “they are not included in the property count and the result is only two financed properties.” Freddie Mac’s limit has the same number and says the count includes the subject property and your primary residence; it also says that a borrower who owns more than one financed investment property can sell a new investment loan to Freddie Mac only if it is a fixed-rate loan or a 7/6-Month or 10/6-Month ARM (4201.13).

The LLC example is a counting rule, not a way to hold title. Fannie Mae “purchases or securitizes mortgages made to borrowers who are natural persons,” with exceptions for inter vivos revocable trusts, HomeStyle Renovation mortgages and certain land trusts (B2-2-01). A conventional loan closes in your name; if you need the loan in an LLC, that is the DSCR route covered in DSCR loan in an LLC.

Rental income: 75% of the rent, and only if you already have a housing payment

Conventional underwriting counts rent, but not all of it. For a purchase, Fannie Mae’s Selling Guide tells the lender to “multiply monthly gross rent by 75% for the net rental income amount, then subtract the PITIA of the subject property from the net rental income,” using a Single-Family Comparable Rent Schedule (Form 1007) or Small Residential Income Property Appraisal Report (Form 1025) (B3-3.8-02). Freddie Mac’s version uses “75% of” the lease rent or the market rent from Form 72 or Form 1000, and adds “The 25% adjustment is made to compensate for vacancies, operating and maintenance costs” (5306.1).

What happens to the result depends on who you are. When the net figure is positive and you have 12 months of rental property management experience, “the lender may use the full amount in qualifying”; without that experience, the income can only offset the payment. When it is negative, “the lender must include the amount in the DTI ratio.” You also need a housing payment: “The lender must document the borrower’s current housing payment to use any rental income from the subject property in qualifying.” DU’s maximum debt-to-income ratio is 50% (B3-6-02).

Rental income at 75%, subject PITIA $2,450 (our arithmetic)

The first row is the common surprise: a rent of $2,600 against a $2,450 payment looks positive, and for the underwriter it is a $500 liability.

What the investor surcharge costs: the LLPA

A loan-level price adjustment is a fee, expressed as a percentage of the loan amount, that Fannie Mae assesses on the lender for a loan with a given risk feature; the matrix says it is “drafted from the lender’s account” or deducted from the loan proceeds, and lenders recover it in the rate or points they quote (our reading). Fannie Mae’s rule for investment property is plain: “An LLPA applies to all mortgage loans secured by an investment property. These LLPAs are in addition to any other price adjustments that are otherwise applicable to the particular transaction” (B2-1.1-01), and the matrix says LLPAs “are cumulative.”

The investment-property line, which is on top of the credit-score grid, depends on leverage and is the same on a purchase, a limited cash-out refinance and a cash-out refinance:

Fannie Mae investment-property LLPA by loan-to-value (September 30, 2026), with the cost on a $300,000 loan (our arithmetic)

A worked example, ours. A $400,000 one-unit rental, 25% down, a $300,000 loan, a 740 score: the score adjustment at 70.01% to 75% is 0.375%, the investor line 2.125%, the total 2.5%, or $7,500. The same borrower buying a home to live in would owe the 0.375%, or $1,125. At 85% loan-to-value, a $340,000 loan: 1.000% for the score plus 4.125% for the investor line is 5.125%, or $17,425, against 1.000%, or $3,400, for an owner-occupant, and the mortgage insurance is extra.

Worked examples of the investor surcharge, $400,000 one-unit purchase (our arithmetic; LLPA cells from the September 30, 2026 matrix)

The last column converts points into rate. Suppose the lender recovered the investor line in the interest rate rather than in points, and you kept the loan for 7 years. At the 2025 median note rate of 6.999% on a 30-year investor loan, the extra 2.125% is worth about 0.398 point of rate on the 75% loan, which moves the payment from $1,995.71 to about $2,076.53 a month. The assumptions are ours, not Fannie Mae’s, and a lender can price it differently.

HMDA lets us check that scale against what borrowers paid. Among 30-year loans that the agencies bought in 2025, the gap in median note rate between investor and owner-occupied loans at the same combined loan-to-value was:

Investor premium in median note rate, 30-year loans bought by Fannie Mae or Freddie Mac in 2025, against the LLPA investor line

The premium grows with leverage in step with the LLPA, from 0.375 point at 60% loan-to-value or less to 1.0 at 80% to 85% (our arithmetic). Dividing the investor line by the rate gap gives about 3.0 to 4.1 points of price for each point of rate. HMDA records the note rate, not the points, so this is a consistency check, not a measure of any one borrower’s price.

Refinancing a rental: cash-out, no cash-out, and seasoning

The loan-to-value caps are in the first table. The conditions for a cash-out refinance are in Selling Guide B2-1.3-03: an existing first mortgage being paid off must be “at least 12 months old,” and “At least one borrower must have been on title to the subject property for at least six months prior to the disbursement date of the new loan.” If the property was in an LLC majority-owned by the borrower, the LLC’s holding time counts, but it must be transferred into your name to close. The delayed-financing exception allows a cash-out refinance within six months of buying if the purchase was arm’s length, had no mortgage financing and the funds are documented. A limited cash-out refinance can give the borrower cash back in an amount that “does not exceed the greater of 1% of the new refinance loan amount or $2,000” (B2-1.3-02). Cash-out refinances also carry the cash-out LLPA grid, which is higher than the purchase grid at the same score. Our page on cash-out refinance on an investment property covers the 2025 lender record for that loan, and HELOC on investment property covers the second-lien alternative.

FHA and VA are not investor loans

Both government programs are for a home you live in. HUD’s Handbook 4000.1 (Update 18, August 12, 2026) defines an investment property as one “not occupied by the Borrower as a Principal or Secondary Residence” and states: “Investment Properties are not eligible for FHA insurance,” with an exception for HUD-approved nonprofit borrowers. The VA guaranty statute lists the purpose of a loan as “To purchase or construct a dwelling to be owned and occupied by the veteran as a home” (38 U.S.C. 3710(a)(1)). If you will live in one unit of a two- to four-unit building, see FHA loan for investment property and VA loan for investment property; for a pure rental, the conventional loan on this page and the investor loans in the box below are the routes.

What 2025 looked like: 486,530 conventional investor loans

The Home Mortgage Disclosure Act record is the one place where the rules can be compared with what lenders did. We streamed the FFIEC/CFPB nationwide loan-level files for 2025 on October 10, 2026, kept conventional (not insured or guaranteed by FHA, VA, RHS or FSA), first-lien, closed-end, one- to four-unit loans, and split them by occupancy code: 3 for investment property and 1 for principal residence. The investor group is conventional in HMDA’s sense, which includes loans made outside the agency programs, such as business-purpose loans (79.0% of the investor loans were reported as business or commercial purpose); the purchaser field separates the ones the agencies bought.

Conventional first-lien loans originated in 2025, investment property against owner-occupied (HMDA)

Three differences stand out. Investors borrowed less against value: 3.6% of investor loans went above 80% loan-to-value, against 35.6% of owner-occupied loans. They paid more for it: 7.25% at the median against 6.5%. And far fewer were sold to the agencies in the same year: 16.0% of investor loans against 46.5% of owner-occupied loans. That last figure is a floor, because HMDA records a purchaser only when the loan was sold in the year it was originated, and the rest includes loans sold in 2026, held in portfolio or made outside the agency programs.

Combined loan-to-value distribution, loans originated in 2025

The 77,718 investor loans the agencies bought were mostly purchases (64.4%), one-unit buildings (87.4%) and 30-year terms (87.7%). Fannie Mae bought 35,568 and Freddie Mac 42,150. 899 lenders sold at least one, and the 10 largest account for 46.7% of them:

Largest sellers of investment-property loans to Fannie Mae and Freddie Mac, loans originated and bought in 2025

Names are as filed with the FFIEC. By name they are mostly mortgage companies and the largest national banks.

Denials: collateral for investors, credit and debt ratios for homeowners

HMDA also records applications that did not become loans. We downloaded the denied and approved-but-not-accepted conventional applications for 2025 and computed the denial rate as denied divided by originated, approved-not-accepted and denied (our arithmetic; withdrawn and incomplete files are excluded).

Denial rate on conventional applications decided in 2025, investment property against owner-occupied

Investor purchases were denied less often than owner-occupied purchases, 13.4% against 15.3%, and so were investor cash-out refinances (24.8% against 27%), but investor refinances without cash out were denied more often (21.3% against 17%). The reasons are different, too. A denial can list up to four reasons; the table shows the share of denials that cite each one (the shares add to more than 100%):

Share of denials citing each reason, applications decided in 2025

For homeowners the leading reasons are credit history and debt-to-income. For investors as a whole the leading reason is collateral, which means the property or its appraisal. The pattern changes with the loan: on the investor applications reported as not business-purpose, the kind an agency loan is, debt-to-income is the top reason (36.6%), close to the homeowner figure, while on business-purpose applications it is only 15.6% because many business-purpose loans are underwritten on the property rather than on the borrower’s income (our reading). About 5.6% of investor denials carry code 1111, which is not in the public list of denial reasons; the FFIEC uses 1111 for “Exempt” in other fields, so we read it as a reason the lender was not required to report.

What a borrower can do with this

1. Check the three gates before the lender does. Units and purpose against the loan-to-value table; reserves including the percentage of other mortgage balances; and your property count against 10, counting your own home and every mortgage you signed personally.
2. Ask what Desktop Underwriter returned. The agency system decides reserves, and an investment property has no manual fallback.
3. Price the surcharge, not just the rate. Add the investor line to the score adjustment (2.5% at 740 and 75% loan-to-value). Ask whether a quote is a rate with the adjustment built in or points on top, and compare quotes on the same assumption.
4. Run the rent at 75%. Take the lease or the appraiser’s market rent, multiply by 0.75, subtract the full payment, and see whether it is a liability. Use our rental property calculator for the cash flow after the loan, and the DSCR loan calculator if the property-level test is the one you will face.
5. Expect a collateral question. In 2025 more than a quarter of investor denials cited it. Ask the lender how it handles appraisal gaps before you pay for one.

If you fail a rule: the investor loans that do not use the agencies

Conventional fits an investor who can document income, has debt-to-income room, has fewer than 10 financed properties, can put 15% to 25% down and will hold title personally. When one of those fails, the loan that qualifies the property instead of the borrower is the DSCR loan; see what is a DSCR loan and DSCR loan requirements for the terms lenders publish.

Kiavi does not make conventional agency loans. In the 2025 HMDA record it originated 25,518 conventional investment-property loans and none was bought by Fannie Mae or Freddie Mac; the same is true of Lima One Capital (2,316), Investor Mortgage Finance, the entity Visio names (2,202), Velocity Commercial Capital (4,776) and RCN Capital (7,774). Kiavi’s own comparison table lists a conventional mortgage as best for “A Primary Home or a Few Financed Properties,” and describes its rental loan as one that qualifies on “Property’s Rental Cash Flow”; its page also says “Up to 80% LTV” and “No prepayment penalty after year 3,” which we read as a prepayment penalty in the first three years (Kiavi website, October 10, 2026, as its own claim). Kiavi pays us a referral fee when a loan closes through its button in the box below; it is a fit for the reader who fails the conventional rules, not a substitute for the loan on this page, and rates, points and prepayment terms must be read in the lender’s own quote. Visio and Lima One are shown as alternatives and do not pay us.

Named investor lenders in the 2025 HMDA record: conventional investment-property loans originated, and loans bought by Fannie Mae or Freddie Mac

FAQ

Sources: Fannie Mae Selling Guide (published October 7, 2026), sections B2-1.1-01, B2-1.2-01, B2-1.3-01, B2-1.3-02, B2-1.3-03, B2-2-01, B2-2-03, B2-2-04, B3-3.8-01, B3-3.8-02, B3-4.1-01, B3-5.1-01, B3-6-02, B7-1-01; Fannie Mae Eligibility Matrix (August 5, 2026) and Loan-Level Price Adjustment Matrix (September 30, 2026); Freddie Mac Single-Family Seller/Servicer Guide sections 4201.13, 4203.1, 5201.1, 5306.1 and 5501.2, read October 10, 2026; HUD Handbook 4000.1 Update 18 (August 12, 2026); 38 U.S.C. 3710; Kiavi website (October 10, 2026), as its own claim; FFIEC/CFPB HMDA Data Browser nationwide loan-level files for 2025 (originated, denied and approved-not-accepted conventional loans, downloaded October 10, 2026; the API has no occupancy filter, so occupancy codes 3 and 1, first lien, one to four units, closed-end, not reverse, were selected locally), FFIEC filer list and public LAR data fields. Counts, medians, shares, denial rates, the investor premium, the cost examples and the rate equivalents are our arithmetic from those files, and the scripts are in the sources folder. This is analysis of public documents, not investment, legal, tax or lending advice, and not a loan offer.