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The Ultimate Guide to Real Estate Investor Loan Type

Explore the types of loans for investment property from conventional to hard money and discover which ones fit different investor strategies.

Written By

Lauren McKinley

Sep 21, 2025

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Whether you’re a seasoned pro or just getting started, it’s always smart to step back and review the lending landscape. The financing you choose doesn’t just fund your deals; it shapes how you see the market, measure returns, and evaluate opportunities.

Clarifying your long-term financing strategy early, even if it doesn’t align with your current financial situation. The math you run in your head — or on the back of a napkin — sets the tone for how you perceive cash flow, risk, and investment potential. A single misunderstanding about loan terms can throw off your analysis, blinding you to opportunities in the process.

In this guide, we’ll break down the main loan types investors use and highlight the scenarios where each one shines:

Government-backed loans: Best for house hacking
Conforming conventional loans: Best for “mom and pop” landlords
Non-conforming conventional loans: Best for serious investors
Non-conforming, non-conventional loans: Best for full-time investors

Ready to match the right loan to your investment strategy? Lima One Capital is one of The Close’s picks for the best investment property loans. It finances DSCR rentals, fix-and-flip, new construction, and small multifamily — so you can start with one deal and scale without switching lenders mid-strategy.

Visit Lima One Capital

Government-backed loans
Conforming conventional loans
Non-conforming conventional loans
Non-conforming non-conventional loans
Final Thoughts

Government-backed loans

There are three types of real estate loans backed by the U.S. government. For most investors, their use is limited because each requires the borrower to occupy the property as a primary residence for a set period after purchase. Even so, these tend to be the loans that new investors are most familiar with, so I think it’s a good idea to start here to establish a baseline for the other types of loans covered in the article.

There are arguments to be made that these loans can be used to invest in real estate, and two in particular come to mind:

House hacking: In the eyes of the government, a quadplex is still a single-family home. Meaning that as long as you live in one of the units, you can buy a small multifamily property and rent out the rest. This makes these loans popular among house hackers.
Anticipated appreciation: Despite what Robert Kiyosaki says, I think that an argument can be made that a primary residence can be considered an investment if purchased based on an analysis-backed expectation of future appreciation.

Best for veterans interested in house hacking
Qualifications	Veteran or active-duty service member Credit ~620+ (varies by lender)
Typical Costs	0% down No private mortgage insurance One-time funding fee (waivable for some veterans)
Typical Terms	15-to-30 year fixed-rate options Competitive interest rates Must occupy as primary residence
Entity Allowed?	No, personal loans only

Conforming conventional loans

Conforming conventional loans are mortgages that meet the guidelines set by Fannie Mae and Freddie Mac. These loans are the bread and butter of the real estate market, and the ones most “mom and pop” landlords end up using. They’re widely available, offer competitive rates, and allow for rental property purchase without the strict occupancy requirements of government-backed loans.

The trade-off? They come with tighter credit, income, and down payment standards than FHA, VA, or USDA loans. Also, you must qualify on the basis of your personal income rather than the commercial value of the property, in almost all cases. However, for small landlords looking to build a rental portfolio steadily over time, conforming loans are often the most practical choice.

Fannie/Freddie loans

Qualifications	U.S. citizen or legal resident Credit score typically 620+ Debt-to-income (DTI) ratio ≤ 45%
Typical Costs	15-25% down payment for investment properties Private mortgage insurance (PMI) required if <20% down Closing costs 2-5%
Typical Terms	15- to 30-year fixed-rate, or adjustable-rate options Can finance up to 10 properties (stricter after 4) Market-based interest rates (higher than primary residences)
Entity Allowed?	No — personal loans only (must be in borrower’s name)

Non-conforming conventional loans

Non-conforming conventional loans are mortgages that don’t meet the purchase standards of Fannie Mae or Freddie Mac. They’re typically offered by banks, credit unions, or private lenders who keep the loans in-house rather than selling them on the secondary market — although today there are more private buyers of non-conforming notes than ever before.

For many real estate investors, non-conforming conventional loans provide a middle ground between traditional mortgages and the expensive world of hard money or private financing. Because these loans aren’t bound by conforming guidelines, lenders have more flexibility. That can mean larger loan amounts, looser property restrictions, or tailored terms for investors with complex financials. On the flip side, interest rates and down payments are often higher.

Qualifications	No personal income verification Loan approval based on the property’s Debt Service Coverage Ratio (DSCR) DSCR typically ≥ 1.2
Typical Costs	20-25% down payment Higher interest rates than conforming loans Prepayment penalties common
Typical Terms	Fixed or adjustable rates 30-year terms common Strictly for rental/investment properties
Entity Allowed?	Yes, LLC-friendly

If your strategy is buy-and-hold, DSCR loans let the property’s cash flow do the talking. Kiavi finances single-family and small 2-4 unit rentals with underwriting built around rent coverage, so experienced and first-time investors alike can scale without wading through W-2 style hoops. Their resources walk you through qualifying, reserves, and what affects DSCR (rents, taxes, insurance), plus how to line up a smooth refi from a short-term loan.

Visit Kiavi

Non-conforming non-conventional loans

Non-conforming, non-conventional loans are the “outside the box” options. They don’t follow Fannie Mae or Freddie Mac guidelines, and they’re not held by banks in traditional portfolios either. Instead, these loans come from private lenders, investors, or specialty finance companies that focus on short-term or higher-risk deals.

They’re usually more expensive, but they give investors speed and flexibility when traditional financing isn’t an option.

Qualifications	Asset-based lending; property value is the primary factor Minimal borrower documentation
Typical Costs	High interest rates (8-15%+) Upfront points (1-5%) Short-term, high fees
Typical Terms	6-24 months, often interest-only Used for flips, rehabs, or quick turnaround projects
Entity Allowed?	Yes, usually LLC is required

When timing kills deals, a flexible bridge can keep you moving. RCN Capital offers short-term financing designed for investors who need to close fast, reposition, or prep for construction — then refinance into long-term debt when the numbers pencil. You can review program types, leverage ranges, and documentation requirements up front so you’re not guessing about fit, and their team can price scenarios around your exit plan (sell, refinance, or hold).

Visit RCN Capital

Final Thoughts

The financing you choose will shape your real estate journey just as much as the properties you buy. Government-backed loans can help you break into the market through house hacking, while conforming conventional loans are a reliable path for small landlords. From there, non-conforming options like DSCR and portfolio loans give serious investors more flexibility, and non-conventional tools such as hard money, private money, and bridge loans open doors when speed or creativity is required.

There’s no single “best” loan for every investor — only the one that fits your strategy, risk tolerance, and long-term goals. Understanding the full landscape means you can analyze deals through the right lens, avoid costly missteps, and scale your portfolio with confidence.

Take the time to match your financing in your analysis to your long-term strategy, not just the deal in front of you. That alignment is what separates casual landlords from investors who build lasting wealth.

Lauren McKinley

Lauren McKinley is a financial professional with five years of experience in credit analysis, commercial loan administration, and banking operations. She has worked at regional lending institutions across the Northeast, evaluating risk, analyzing financials, and managing loan processes. Specializing in commercial real estate and small business financing, Lauren has helped diverse borrowers navigate financial solutions.