Conventional Investment Property Loans in Florida: Down Payment, Pricing, Reserves and Limits

Cheap money when your returns support it. DSCR when they don't.

Conventional rewards investors whose tax returns show solid income. DSCR rewards investors whose properties show solid rent. Most serious investors end up using both. The trick is knowing which one each deal needs.

75% of the rent counts

How leases, appraiser rent estimates and Schedule E turn rent into qualifying income.

Rental income rules

What counts as an investment property

Any property you buy to rent out and don't live in. A single family rental, a condo, a duplex, triplex or fourplex you won't occupy, or a vacation rental you run mainly as a business. If you'll live in one unit of a two to four unit property, that's a primary residence with very different terms. See two to four units. If you'll use it yourself part of the year and rent it only occasionally, it may be a second home.

The core terms

Down payment: typically 15% for a single unit and 25% for two to four units.** Pricing:** higher than a primary home because of investment pricing adjustments.** Reserves:** required, and they grow as you own more financed properties.** Gifts:** generally not allowed.** Seller credits:** limited to 2%.** Borrower:** individuals, not LLCs.

Why conventional is usually cheapest

Conventional investment loans carry lower rates and lower fees than most DSCR and portfolio loans, have no prepayment penalty, and offer 30 year fixed terms. Over the life of a rental, that difference adds up. The tradeoff is documentation: your tax returns have to support the debt.

Where conventional gets hard

Heavy write offs on your returns. A large portfolio, since the 10 property limit and rising reserves bite. Buying in an LLC. Using projected short term rental income on a new purchase. In each of those cases, a DSCR loan is often the better tool. See conventional vs DSCR.

Where conventional falls short

Seller credits are capped at 2%. On investment property, the seller can only contribute 2% of the price, no matter how motivated they are. When a seller is offering more, that cap leaves money on the table. Some DSCR programs allow more.** No prepayment penalty means no rate buydown through one.** That sounds like a pure win, but it cuts both ways. DSCR and other non QM lenders often price a loan better when you accept a prepayment penalty, and stacking a longer penalty can lower the rate further. On the right deal, a DSCR loan with a prepayment penalty can actually price better than conventional. If you know you'll hold for years, that tradeoff can be worth it.** No LLC.** Conventional loans close in your personal name. If you want the property in an LLC from day one, that's a real limitation.** Your tax returns have to carry it.** See how lenders read Schedule E. Write offs and depreciation can shrink your qualifying income, and the 10 financed property cap and growing reserves slow down larger investors.** Projected short term rental income usually doesn't count** on a purchase.

It can make your next home harder to buy

This is the weak spot investors find out about too late. Every conventional rental you finance follows you into your next primary home purchase:

Your debt ratio. The full rental payment counts as a debt, offset by only 75% of the rent, or by your Schedule E income after depreciation. A rental that cash flows in real life can still count against you on paper.** Reserves.** Lenders require reserves for every other financed property you own, and the percentage rises as your portfolio grows.** The property count.** Your primary home counts toward the 10 financed property limit too. If your rentals use up the count, there may be no conventional room left for the home you want to live in.** First time buyer benefits.** Under Fannie Mae and Freddie Mac's definition, owning any residential property, including a rental, generally ends first time buyer status. That can cost you options like HomeOne and standard 3% down conventional, the HomeReady $2,500 credit and some pricing breaks. Florida Housing's assistance looks at whether you've owned a principal residence instead, so a rental may not disqualify you there. Check each program.

How to plan around it

Buy your own home first if you're planning both soon, so you keep first time buyer benefits and qualify before rental debt stacks up.** Make sure each rental cash flows on paper,** not just in real life.** Know your property count and reserves** before each purchase. And for some investors,** a DSCR loan for the rental** can be part of the answer, though how it affects your next purchase depends on how the loan is structured and reported, so ask before you assume.

When a client tells me they want a rental now and a home in a year or two, I map both purchases together before they buy anything.

Where conventional is easier

First time investors. Conventional doesn't require landlord experience to buy a rental, and it doesn't penalize you for being new. Many DSCR lenders limit first time investors with larger down payments, lower loan amounts or restrictions on short term rentals.** No prepayment penalty** if you want flexibility to sell or refinance early.** 30 year fixed pricing** that's usually lower when your file fits.

Occupancy is the same rule either way

Whether it's conventional or non QM, the loan has to match how you'll actually use the property. An investment property is financed as an investment property. Calling a rental a primary or second home to get better terms is mortgage fraud, on any loan.

How I run an investment deal

I look at the property first and the loan second. Rent, vacancy, insurance, taxes, repairs and capital expenses come before the rate. If a deal only works at 100% occupancy, I keep looking. When the numbers work, I price conventional and DSCR side by side and pick the one that costs less over the time I'll hold it. Run your own numbers with the rental property calculator.

The full guide

Rental income rules · Conventional for vacation rentals · Refinancing rentals · Turning your home into a rental · Scaling past 10 properties · Conventional vs DSCR · Second homes

Conventional for the second rental, DSCR for the fifth

Gina bought her first two rentals with conventional loans. Her W2 income and Schedule E supported them, and she got the best pricing available. By her fifth property, reserves and her heavy depreciation made conventional harder, so she switched that purchase to DSCR. Using both kept her cost of money low while she grew.

Investment Property Down Payment and Pricing

Minimum down payments

Fannie Mae and Freddie Mac guidelines. Lenders may require more.

Why investment loans cost more

Fannie Mae and Freddie Mac charge loan level pricing adjustments on investment property, and they're substantial. The adjustment depends mainly on your down payment and credit score. Multi unit properties and cash out refinances add more. Lenders pass these through as a higher rate or as points.

15% vs 20% vs 25% down

At 15% down on a single unit, you'll pay mortgage insurance and a larger pricing adjustment. At 20%, mortgage insurance goes away. At 25%, the investment pricing adjustment often drops another notch. Sometimes putting a bit more down lowers your rate enough to improve cash flow and your return. Sometimes keeping cash for the next deal wins. Run both.

How I think about it

On my own deals, I don't automatically put the minimum down. I look at the rate at each down payment level, the effect on monthly cash flow, and what that extra cash could do in my next property. The right answer changes deal to deal.

Where the money can come from

Your own funds. Gifts generally aren't allowed on investment property. Proceeds from selling or refinancing another property can work, documented. Retirement funds can work if withdrawn and documented.

Closing costs and seller credits

Sellers can contribute up to 2% on investment property. That's a hard cap and one of conventional's weak spots on investment deals. If a seller offers more, the extra can't be used, so consider asking for a price reduction instead. Closing costs include Florida doc stamps and intangible tax, title, lender fees and prepaid landlord insurance.

Five points more down, better cash flow

Marcus compared 20% and 25% down on a $350,000 single family rental. The 25% option crossed a pricing tier, and his rate dropped enough that monthly cash flow improved, even counting the extra $17,500 he put in.

Investment Property Reserves and the 10 Financed Property Limit

Reserves for the property you're buying

Investment purchases typically require several months of the new property's full payment in reserves, often around six months, depending on the automated findings.

Reserves for the properties you already own

On top of that, lenders require reserves based on the mortgage balances of your other financed properties. The percentage rises as your portfolio grows, commonly around 2% of the balances with one to four financed properties, 4% with five or six, and 6% with seven to ten.

What counts as reserves

Checking and savings, stocks and bonds, and retirement accounts, usually at a discount for taxes and penalties. Cash from the loan itself doesn't count.

The 10 property limit

Conventional allows up to 10 financed one to four unit properties, counting your primary home. Once you have seven or more, expect stricter credit requirements, often a 720 score or higher, and the full reserve load. Properties owned free and clear don't count toward the limit.

Your own home counts too

Your primary residence counts toward the 10 property limit, and your rentals' reserves are added when you buy your next home. If you plan to move up or relocate, leave room for it.

Planning your growth

Know your reserve number before you shop. Keep reserves in accounts that are easy to document. Consider paying off a small mortgage to stay under a threshold. And plan the point where you'll move new purchases to DSCR. See scaling past 10 properties.

How I think about reserves

Lender reserve rules are the minimum. Real reserves are what keep you calm when an AC unit dies, a tenant stops paying and the insurance renews higher, all in the same month. On my own properties, I plan for that, not for the guideline.