Common questions for investorsFor rental properties, house hacks, DSCR loans, cash-out, and 1031 exchanges. Twenty-five of the questions people search and ask AI most often, answered in plain English for Texas. |
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1. Can I get a mortgage on a rental property?
2. How much down payment on an investment property?
3. What is a DSCR loan?
4. Do I need tax returns for a DSCR loan?
5. DSCR vs conventional investment: which is better?
6. What credit score do I need to finance a rental?
7. How many financed properties can I have?
8. What are reserves?
9. What is the difference between a second home and an investment property?
10. Can I house-hack a duplex or fourplex?
11. Can I finance a short-term rental or Airbnb?
12. Can I cash out a rental in Texas?
13. What is a 1031 exchange, in plain English?
14. Can I use FHA or VA on an investment property?
15. Are investment rates higher than primary-home rates?
16. What is a prepayment penalty on a DSCR loan?
17. How do lenders calculate the rent number?
18. Can I buy a vacant rental?
19. Should I close in an LLC?
20. I have never owned a rental. Can I still get an investment loan?
21. Do you finance 1–4 units only, or bigger?
22. Does the Texas homestead exemption apply to my rental?
23. Are interest-only DSCR loans available?
24. What documents do investors need?
25. Why use a broker for investment property?
Can I get a mortgage on a rental property?
Yes. Conventional investment loans use your income, credit, and the property’s rents. DSCR loans qualify mainly on the property’s rent versus the payment, with less focus on your personal tax returns. Hill Country Home Loans shops both for Texas 1–4 unit properties.
How much down payment on an investment property?
Conventional investment purchases often start around 15% to 25% down, more than a primary home. DSCR loans commonly want about 20% to 25%, sometimes 15% with a strong ratio and credit. 20% is a planning number, not a law.
What is a DSCR loan?
DSCR means debt service coverage ratio: monthly rent divided by the monthly housing payment (principal, interest, taxes, insurance, HOA). About 1.0 means rent covers the payment. Many lenders like 1.20 to 1.25 for better terms. It is a rental-property loan, not a primary-home loan.
Do I need tax returns for a DSCR loan?
Usually no personal tax returns for income. Lenders still want credit, a full application, property insurance, and proof of reserves. Leases, rent surveys, or short-term-rental reports support the rent number. That is the point for investors who write off a lot on their returns.
DSCR vs conventional investment: which is better?
Conventional is often cheaper if your personal DTI and tax returns are strong and you are under agency property-count limits. DSCR fits when returns are thin, you have several financed properties, or you want the property to stand on its own. We will price both when you qualify for both.
What credit score do I need to finance a rental?
Conventional investment often wants scores around 620 to 680, with better pricing higher. DSCR lenders commonly start in the mid-600s, with the best rates closer to 720. Recent mortgage lates hurt more than a thin card history.
How many financed properties can I have?
Fannie and Freddie cap how many financed properties you can have on conventional loans. DSCR and other non-QM programs are built to go past that. If you are scaling a portfolio, tell us the count up front so we pick the right lane.
What are reserves?
Cash left after closing that can cover the payment if a unit sits empty. Investment loans often want several months of PITIA, and more if you already have other rentals. Checking, savings, and sometimes brokerage or retirement accounts count, usually with a haircut.
What is the difference between a second home and an investment property?
A second home is for your personal use, with limits on rental activity. An investment property is rented to tenants as the main purpose. Occupancy is an underwriting fact, not a nickname. Mislabeling it can get the loan called due later.
Can I house-hack a duplex or fourplex?
Yes. If you live in one unit, FHA, VA, and conventional primary-home rules may apply, which can mean less down than a pure rental. The other units’ rents can help you qualify. You must actually occupy it as your primary home.
Can I finance a short-term rental or Airbnb?
Sometimes. Conventional is picky. Many DSCR lenders will use actual booking history or a market report, often with a vacancy haircut. The property has to be legally allowed to operate as a short-term rental in that city. Austin-area rules vary by jurisdiction.
Can I cash out a rental in Texas?
Yes. A non-homestead rental does not use the Texas 50(a)(6) homestead equity rules. LTV is set by the investor program, often around 70% to 75% on cash-out. Homestead cash-out is the 80% / 12-day product. Mixing those up is a common Texas mistake.
What is a 1031 exchange, in plain English?
A tax rule that lets you sell an investment property and roll the gain into a replacement property if you follow IRS timelines and intermediary rules. The loan still has to qualify on its own. This is not tax advice. Coordinate your CPA, the QI, and us before you list.
Can I use FHA or VA on an investment property?
Not for a pure rental you will not live in. FHA and VA are for primary homes. A 2–4 unit you occupy can be a house hack. Using FHA or VA on a house you never move into is occupancy fraud. Don’t.
Are investment rates higher than primary-home rates?
Usually yes. Agency investment loans add pricing adjustments. DSCR rates are set by credit, DSCR, down payment, and sometimes a prepay penalty. Compare the payment and the cash flow, not just the note rate.
What is a prepayment penalty on a DSCR loan?
Many DSCR loans charge a fee if you pay off or refinance in the first few years, often a 3-2-1 or similar step-down. It is how those rates are priced. If you plan to sell or 1031 soon, we will look for a shorter prepay or no-prepay option.
How do lenders calculate the rent number?
On a leased property, the lease, with a cap against market rent. On a vacant property, an appraiser’s market rent. Short-term rentals often use trailing bookings or a third-party estimate, then a haircut. Optimistic Proforma rent is not enough.
Can I buy a vacant rental?
Yes. Conventional may use market rent from the appraisal. DSCR on a vacant property is tighter and may need more down payment or a stronger ratio. Have a lease-up plan. Do not count on full rent the week after closing unless it is already leased.
Should I close in an LLC?
Investors often want the LLC for liability. Many DSCR lenders will loan to an LLC. Conventional agency loans are usually in a person’s name, sometimes with an entity vesting exception. Title, insurance, and the loan have to match. Tell us before you form anything new mid-deal.
I have never owned a rental. Can I still get an investment loan?
Yes. First-time investors can use conventional or DSCR. Expect more documentation of reserves and a cleaner credit file. Start with a property whose rent comfortably covers the payment. We will not talk you into a thin deal.
Do you finance 1–4 units only, or bigger?
Hill Country Home Loans focuses on 1–4 unit residential. Five-plus units is typically commercial. If you are looking at a five-unit, we will tell you that up front rather than force it into a residential box.
Does the Texas homestead exemption apply to my rental?
No. Homestead is for your primary residence. Rentals pay full local tax unless another exemption applies. That is one reason investor payment math in Texas is higher than a national calculator shows.
Are interest-only DSCR loans available?
Some DSCR investors offer interest-only periods. The payment is lower, so DSCR looks better, but you are not paying down principal. It is a tool, not a free lunch. We will show the fully amortizing payment too.
What documents do investors need?
For conventional: income docs (W-2 or tax returns), leases, insurance, reserves, and the purchase contract. For DSCR: application, credit, property info, leases or rent support, insurance, and reserve statements. Entity docs if buying in an LLC.
Why use a broker for investment property?
Investment overlays and DSCR menus change by lender every week. One shop’s 20% down is another’s 25%, and prepay terms differ. We compare those terms the same way we compare primary-home rates.
Have Questions?
Online answers get you oriented. A quick conversation gets you numbers for your file. Call 512-784-4391, ask a professional, or apply now.
This page is for general education. It is not a commitment to lend or a guarantee of approval. Eligibility, rates, costs, and terms depend on credit, income, property, occupancy, loan program, and underwriting. Equal Housing Opportunity. Licensed by the Texas Department of Savings and Mortgage Lending.
