How to Get an Investment Property Loan with 10% Down
Real estate investing can feel like an exciting adventure. When you take your time and find the right investment property, the investment might help you improve your monthly cash flow and generate extra income. Finding the right investment property loan can 
make all the difference in whether or not your investment property is profitable-or a financial burden.
High down payment requirements send many investors searching for more affordable ways to secure financing. And while lower down payment options on rental property loans can certainly be complicated, there are alternative solutions you might want to consider.
How Investment Property Loans Work
Similar to the way a personal mortgage works, an investment property loan provides the funds you need to purchase a house, multifamily property, commercial property, or land. You are expected to put down a percentage of the sale price (more on that in the next section).
The property you’re buying acts as collateral for the loan. If you’re unable to pay the loan in full, the lender has the right to seize the property to sell and cover your debt.
How Much Do You Need to Put Down on an Investment Property?
Qualifying for investment property financing can be more challenging than you might expect, especially if you’re a new property investor. Many first-time real estate investors are surprised to learn that a 20% down payment on a rental property loan is considered normal.
A 20% down payment can be a sizable amount, depending upon the purchase price of the property. Imagine you want to buy a $500,000 multifamily dwelling. If the lender requires 20% down, you’d need to come up with $100,000 in cash to seal the deal.
Can I Find an Investment Property Loan with 10% Down?
A sizable down payment is standard when you take out investment property loans. But you may be able to buy an investment property with as little as 10%, 3.5%, or even 0% down.
Loan programs like HomeReady and Home Possible make purchasing an investment property with 10% down or less a possibility. To qualify, you’ll need to satisfy a lender’s approval criteria. In addition to more stringent credit score and cash reserve requirements, you may need to do the following:
- Become an owner-occupant and move into the property for a minimum of one year.
- Show proof of income high enough to qualify for the loan, but below the local median income.
Either loan may work for owner-occupied investment properties. But they’ll also appear on your personal credit reports with Equifax, TransUnion, and Experian. The mortgage could impact your credit for the good or for the bad, based upon whether or not you make all periodic payments in a timely manner.
Fannie Mae’s HomeReady Loan Program
One option that can work well for buyers looking to purchase a home with a smaller down payment is Fannie Mae’s HomeReady Loan Program . Qualified buyers may be able to secure a fixed-rate mortgage rate for as little as 3% down.
This mortgage loan program is designed to help moderate- to low-income borrowers with decent credit become homeowners. The HomeReady loan program may work well for owner-occupants who wish to rent out a portion of their home (or a multi-home unit) to help cover the cost of housing.
Here’s why the HomeReady program can be helpful to owner-occupant investors. The program lets borrowers include income from “accessory units and borders” for qualification purposes. Don’t earn enough income to satisfy the lender’s debt-to-income ratio requirements? The rent money you’ll collect on the property might help you qualify.