Financing an investment property works differently than financing a primary residence, and conflating the two is one of the most common first-time investor mistakes. Higher down payments, higher rates, and different qualification rules all apply once a lender knows the property will not be owner-occupied.
This gets more complicated on a ground-up custom home build, where a lender is underwriting a construction loan against plans and a builder's contract rather than an existing, appraised property in Fort Worth or elsewhere in the metro.
Financing Options Compared
| Loan type | Typical down payment | Best for |
|---|---|---|
| Conventional investment loan | 20-25% | Straightforward rentals with stable income to qualify |
| FHA / VA (owner-occupied only) | 0-5% | House hacking a small multi-family you live in |
| DSCR loan (debt-service coverage ratio) | 20-25% | Investors who cannot easily document personal income, qualifying off rent instead |
| Hard money | 10-20%, high rates | Short-term flips or rehab-heavy properties needing fast closing |
| Portfolio / commercial loan | Varies, often 25-30% | Investors scaling past the conventional loan limit (typically 10 properties) |
Rate Expectations vs. a Primary Home Loan
Investment property rates typically run 0.5-1.0 percentage points higher than a primary residence rate, and lenders often require higher cash reserves (2-6 months of payments) on top of the down payment. This is standard across the industry, not a red flag on any individual lender, whether you are buying in Plano or anywhere else in DFW.
What Financing Question Do Beginners Get Wrong Most Often?
Beginners frequently assume their construction or renovation budget can be rolled into a standard purchase loan the way it might on a primary-home renovation loan. Most conventional investment loans do not include rehab financing - that typically requires a separate renovation loan product, a HELOC, or cash, and needs to be planned for upfront, not discovered mid-transaction.
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