Royal Mortgage›Royal Rate Review›Investment property
The one door
There is one place to apply, and this is it.
Takes you to our secure application site at my1003app.com.
Business-purpose lending. Not for owner-occupied property or for personal, family, or household use.
About investment property loans
These are loans on property you do not live in. They are business-purpose loans for non-owner-occupied real estate, and they are not for a home you intend to occupy. The consumer mortgage rules that protect a primary residence work differently here.
If this is your first investment property, say so. A first-time investor is not the same thing as a first-time homebuyer, and the two are not underwritten the same way.
Royal Rate Review
Investment property
The standing page behind the weekly review. What a rental is actually asked to do, why a move in the cost of money lands on it differently than it lands on the house you sleep in, and how this kind of financing is qualified.
The application at the top of this page is the consumer mortgage application — it is for a home you will occupy. If the property is a rental you will not live in, that is a different file with different rules, and it starts with a conversation instead. Talk to us about an investment property.
Where the line is
Occupancy is the whole boundary. Read this part slowly.
- The property is non-owner-occupied — one to four unit residential investment property that you do not live in.
- If you expect to occupy the property for more than 14 days in the coming year, this program is not available to you. Apply for a Royal Mortgage consumer loan instead. That is what the application at the top of this page is for.
- Proceeds must be used for a business purpose — acquiring, improving or maintaining rental property. This is not a way to raise money for personal, family or household use, and it is not a way to pay off household debt.
- You sign a business-purpose and occupancy certification at closing, and occupancy is verified again after closing.
- Representing that a property is an investment when you intend to live in it, or that you will live in a property you intend to rent, is mortgage fraud. It is a federal crime, and it is reported.
Investment property financing is for non-owner-occupied, business-purpose transactions and is not intended for properties the borrower will occupy. Qualification, terms, and available programs differ from owner-occupied financing.
Why a rate move lands differently here
A rental and a residence are solving two different problems.
On the house you live in, the rate sets a payment you carry out of your income. That is a household question. You are asking whether you can live with the number.
On a rental, the rate sets a payment the property is expected to carry out of its own rent. That is an operating question. You are not asking whether you can live with the number, you are asking whether the building can.
That difference is the whole reason this page exists, and it is why the same headline about the bond market means two different things to two different readers. The homeowner is watching a payment. The operator is watching coverage — whether the documented rent still clears the debt service on the property with room left over.
Here is the part people miss. The cost of money moves faster than rent does. Financing cost is set on the day you lock. Rent is set by a lease and it does not reprice until that lease turns over, if it moves at all. So when the cost of money changes, the coverage math changes immediately, and the rent side answers slowly or not at all. On a primary residence that gap does not exist, because your income is not sitting inside a twelve-month contract with a tenant.
Which is why an investor's real question is almost never “what is the payment.” It is “at this cost of money, what does this property still support” — and that answer changes what you can pay for the property, how much you want in reserves, and whether a deal is still the deal you underwrote three weeks ago.
And the national averages you see quoted for mortgages are not the price of this. Those surveys measure owner-occupied lending. Non-owner-occupied business-purpose financing is a separate market pricing a separate risk, so an owner-occupied average is not a quote for a rental and does not describe one.
What actually moves, and what it does to a rental
Conditions and mechanisms. Not predictions.
If the cost of money eases
On the same rent, coverage improves, because the debt service side of the ratio got smaller while the rent side stayed where the lease left it. That is the mechanism, and it is arithmetic.
The other side of it: cheaper money usually brings more buyers to the same properties, and more competition for a property tends to push its price the other way. Better coverage on a more expensive purchase is not automatically a better outcome. Which of the two wins is a question about a specific property in a specific month, and it is not something anyone can promise you in advance.
If the cost of money rises
On the same rent, coverage tightens, for exactly the same arithmetic reason running the other way. Nothing about the building changed. The financing did.
The other side of it: when money gets more expensive some buyers step back, and less competition for a property tends to loosen what it takes to buy it. That has historically been the trade — harder financing against a softer entry. It does not always hold, it does not hold everywhere, and it is not a reason to do anything in particular.
We do not tell you when to lock, and this page is not telling you to buy anything. That call is yours. Bring your own numbers on a specific property to your loan officer and work it with the file in front of you. Nothing above is a fact about the future — it is how the pieces move, and the market does what it wants.
What an investor is actually solving for
Four questions, in the order they usually get asked.
- Does the documented rent cover the debt service on this propertyCoverage
- What is left after taxes, insurance, and whatever the association chargesCarry
- How much cash is committed at closing, and what stays in reserve after itLiquidity
- What happens to all of the above if the unit sits empty for a stretchVacancy
A rate move touches the first one directly and the other three indirectly. That is the honest shape of it. Anybody who tells you a rate move only changes your payment is describing a different kind of loan.
How this financing is qualified
The property carries the qualifying income. It does not carry the underwriting.
Personal income is not used to qualify. The property's documented rent is.
That is the one real difference, and it is a big one. Your paystubs and your tax returns are not the qualifying income on this kind of file. A signed lease, or a supported market rent analysis on the appraisal, is.
Everything else is still underwritten. Rental income does not replace underwriting, no property qualifies by itself, and no loan is approved before it is underwritten. Here is what is actually reviewed:
- A signed lease, or a supported market rent analysis
- An appraisal of the property
- A credit review — your credit is pulled and it is looked at
- Assets to close, and reserves after closing
- Loan-to-value limits
- Title and hazard insurance
- Entity documents, where the property is held in an entity
- A personal guaranty, where one is required
- A business-purpose and occupancy certification
There is no version of this where nobody asks you for anything. There is a version where what we ask about is the property instead of your paycheck, and for a lot of operators that is the difference between a file that works and a file that dies on a debt-to-income calculation that never described their business anyway.
First-time investors
First-time investors are welcome. The property must be non-owner-occupied.
A first-time investor is not a first-time homebuyer. Those are two different things, they are underwritten differently, and this page is only about the first one. If the property you are looking at is a home you plan to live in — including one side of a two-unit building — that is a consumer mortgage and it belongs at the door at the top of this page, not here.
This financing is built for people who already have income and credit and want leverage on a rental business. It is not a way around qualifying.
Starting an investment property file
Tell us about the property and how it is held, whether there is a lease on it today, and what the money is for. That is the beginning of it.
This is a conversation, not an application, and it is not a rate quote. Program availability varies by lender and by property.
This page states no rate, no payment, no down payment and no term, and it is not an advertisement of terms available to any particular borrower. Investment property financing is non-owner-occupied. It is priced separately from the owner-occupied averages cited in the Royal Rate Review, and those averages do not apply to it. National survey averages are not your rate. Royal Mortgage LLC is not affiliated with, sponsored by, or endorsed by Freddie Mac, the U.S. Department of the Treasury, the Board of Governors of the Federal Reserve System, or any Federal Reserve Bank.