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Real Estate Investor 1-4 Units • Conventional • FHA House Hack

Investment Property Loans
in Michigan.

Single-family rentals, duplexes, triplexes, and fourplexes. Conventional financing using your personal income to qualify -- not a rental income formula. The foundation of most Michigan real estate investment portfolios starts here. Higher down payment, stronger credit, better reserves -- and a payment that makes sense against the rent the property generates.

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Quick Answer

An investment property loan is a conventional mortgage used to purchase a 1-4 unit property you do not intend to occupy as your primary residence. You qualify based on your personal income, credit, and financial profile -- not the property's rental income alone. Down payment minimums are higher than primary residence loans (15% for single-family, 25% for 2-4 units), rates are higher, and reserve requirements are more substantial. Up to 10 conventionally financed properties are allowed per borrower under Fannie Mae and Freddie Mac guidelines.

15%
Min Down (SFR)
25%
Min Down (2-4 Unit)
620+
Min Credit Score
6 Mo
Reserves Required
10
Max Financed Properties

How Investment Property Loans
Actually Work

An investment property loan is a conventional mortgage -- it follows Fannie Mae and Freddie Mac guidelines -- applied to a property you are buying as a rental or investment rather than a primary residence. The qualification process is similar to a primary residence loan but with meaningfully higher requirements across every dimension: more down payment, stronger credit, more reserves, and a higher rate.

The rate premium exists because lenders have historically seen higher default rates on investment properties than primary residences. When times get tight, people are more likely to protect their primary home payment than their rental property payment. That risk is priced into the rate you pay as an investor -- typically 0.5% to 1.0% higher than an equivalent primary residence loan.

In Northern Michigan, investment property loans are used for single-family rentals in communities with strong long-term rental demand, short-term vacation rentals in resort markets (with the caveat that income documentation for STRs follows specific rules), duplexes and small multi-family properties in Traverse City, Cadillac, and Petoskey, and entry-level investment acquisitions for buyers building their first portfolio.

What Lenders Look at Differently on Investment Properties

Down payment. Single-family investment properties require a minimum 15% down under conventional guidelines. Two to four unit investment properties require 25%. There is no pathway to lower down payments on true investment properties through conventional financing -- this is a hard floor, not a guideline.

Reserves. Most lenders require 6 months of the subject property's PITIA payment in verifiable liquid assets. If you own other financed properties, you may need additional reserves for those as well -- requirements stack as you add properties to your portfolio.

Rental income counting. For a property with an existing lease, lenders typically count 75% of the gross rental income toward offsetting the mortgage payment in your DTI calculation. For a new purchase with no rental history, some programs allow market rent from the appraisal to be counted. For short-term rentals, the rules are more restrictive -- rental income from STR platforms may require a documented history before it counts.

The 10-property limit. Fannie Mae and Freddie Mac allow a maximum of 10 total financed properties per borrower, including your primary residence. Once you approach that limit, DSCR loans become the standard path for continued acquisition.

Who This Program Works Best For

  • First-time investors purchasing their first rental property in Michigan
  • W2 earners with strong income who want conventional financing at standard rates
  • Buyers purchasing small multi-family properties in Northern Michigan communities
  • Investors building a portfolio up to the 10-property conventional limit
  • Buyers who want to house-hack a 2-4 unit with FHA and transition to investment financing later
  • Buyers purchasing a second home that will generate some rental income

Investment Property At a Glance

Min Down (1 unit)15%
Min Down (2-4 unit)25%
Min Credit Score620+
Rate vs. Primary+0.5 to 1.0%
Reserves6 months PITIA
Rental Income75% of gross (w/ lease)
Max Properties10 (incl. primary)
Loan TypeConventional

Ready to Add a Rental?

Tell us the property address and your current financial picture. We will run qualification in minutes and tell you exactly what the numbers look like.

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Down Payment by Property Type

Requirements vary significantly based on the number of units. Know your number before you make an offer.

🏠

Single-Family Rental

15% Minimum Down

Most common investment property type. Strong rental demand throughout Northern Michigan communities. Conventional financing with standard 15% minimum.

🏘️

Duplex

25% Minimum Down

Two-unit property. As investment, requires 25% down. As primary residence with FHA, as little as 3.5% down with owner occupancy of one unit.

🏢

Triplex

25% Minimum Down

Three-unit property. Investment financing requires 25% down. Combined rental income from three units can produce strong cash flow at the right purchase price.

🏬

Fourplex

25% Minimum Down

Four units is the maximum for residential conventional financing. Above four units is commercial lending territory with different qualification standards entirely.

Investment Conventional vs. FHA House Hack vs.
DSCR -- Which One When

Three different products for three different investor situations.

Factor Conv. Investment FHA House Hack DSCR Loan
Min Down Payment15-25%3.5%20-25%
Owner OccupancyNot requiredRequiredNot required
Qualify OnPersonal incomePersonal incomeProperty rent only
Max Properties10 totalPrimary onlyNo limit
Rate vs. PrimaryHigherSame as FHAHigher (non-QM)
W2 / Tax ReturnRequiredRequiredNot required
Best ForPortfolio builders to 10Entry-level multiSelf-employed / 10+ props

The FHA House Hack -- The Investor's Entry Ramp.

Buying a duplex, triplex, or fourplex with an FHA loan and living in one unit is one of the most powerful entry strategies in real estate investing. You get primary residence financing -- as little as 3.5% down -- on a property that generates rental income from the other units. The rental income from the vacant units can help qualify for the loan, and once you have built equity and are ready to move, the property transitions to a full investment property.

FHA requires owner occupancy of one unit. Not available for pure investment without occupancy.

3.5%
FHA Down Payment
4 Units
Max FHA Property Size
75%
Rental Income Counted

How the Investment Property Process Works

Same bones as a primary residence purchase -- with higher documentation standards and more scrutiny on reserves.

1

Pre-Qualification

We review your income, credit, current properties, and available down payment and reserves. For investment properties, the reserves picture matters as much as the income picture -- we identify any gaps early so there are no surprises when you go under contract.

2

Property Analysis

We look at the property type, estimated rental income, and how the rent stacks up against the mortgage payment. If there is an existing lease we document it for the rental income offset calculation. For properties with no rental history, we evaluate whether market rent from the appraisal can be used.

3

Pre-Approval and Offer

With a full investment property pre-approval in hand, your real estate agent submits offers on qualifying properties. Investment property pre-approvals are respected by listing agents who understand what they are seeing.

4

Appraisal with Rent Schedule

Investment property appraisals include a rent schedule (Form 1007 for single-family or Form 1025 for multi-family) that documents market rent. This is the figure the lender uses in the rental income offset calculation if there is no existing lease.

5

Underwriting and Close

Investment property files receive additional scrutiny on reserves, occupancy representations, and the rental income documentation. We manage the process and keep the file moving toward close.

Hitting the 10-Property Limit? Consider DSCR.

Once you approach the conventional 10-financed-property cap, DSCR loans let you continue acquiring rental properties based on each property's rental income -- no personal income documentation required. Many Northern Michigan investors combine conventional financing for their first properties with DSCR for continued portfolio growth.

Learn About DSCR →

Frequently Asked Questions

Conventional investment property loans require a minimum 15% down payment for single-family properties and 25% for 2-4 unit properties. These are hard minimums under Fannie Mae and Freddie Mac guidelines -- there is no pathway to lower down payments on true investment properties through conventional financing. FHA loans allow lower down payments but require owner occupancy of one unit, making them a house-hack strategy rather than a pure investment tool.
Yes -- rental income can offset the investment property mortgage payment in your debt-to-income calculation under specific conditions. For a property with an existing lease and documented rental history, lenders typically count 75% of gross rental income. For a new purchase with no rental history, some programs allow projected market rent from the appraisal rent schedule. The rules differ by program and lender -- we walk through the specific calculation for your situation during pre-qualification.
Fannie Mae and Freddie Mac guidelines allow a maximum of 10 total financed properties per borrower, including your primary residence. So if you have a primary and 3 investment properties, you have used 4 of your 10 slots. Once you approach that cap, DSCR loans become the standard path for continued portfolio growth -- they are not subject to the conventional 10-property limit.
You can buy a 2-4 unit property with an FHA loan but you must occupy one of the units as your primary residence -- FHA does not allow pure investment purchases where you do not live on site. The house-hack strategy is legitimate and widely used: buy a duplex with 3.5% down, live in one unit, rent the other, and after building equity and establishing rental history, move out and transition the property to a full investment. At that point conventional investment financing applies to your next purchase.
Yes -- conventional investment property loans can be used on properties intended for short-term rental in Northern Michigan vacation markets. The qualification is based on your personal income, not the STR income. Short-term rental income from Airbnb or VRBO typically cannot be counted toward qualification on a conventional investment loan without a documented history. For buyers who want to qualify based on STR income, DSCR loans with AirDNA market data are usually the better fit.
Most conventional investment property loans require 6 months of the subject property's full PITIA payment in verifiable liquid reserves after closing -- meaning after your down payment and closing costs are accounted for. If you own other financed properties, additional reserves may be required for those as well. Reserve requirements are one of the most commonly overlooked qualification factors for investors -- we review your full reserve picture during pre-qualification so there are no surprises.

Ready to Add a Rental Property
to Your Portfolio?

Tell us the property address and your financial picture. We will run the qualification numbers, calculate the rental income offset, and tell you exactly what you need to make it work.

Start Your Pre-Qual Free Consultation

Kirby and Angie Mortgage Loan Team | Union Home Mortgage | NMLS #2229229 | Angie Anderson NMLS #1999286 | Kirby Slocum NMLS #680817 | Licensed in Michigan, Ohio, and Indiana | Equal Housing Lender. Investment property loan eligibility subject to credit approval, income verification, reserve requirements, property appraisal, and conventional loan guidelines. Minimum down payment requirements are subject to change per Fannie Mae and Freddie Mac guidelines. Rental income counting rules subject to lender overlays. The 10-property financing limit is subject to Fannie Mae and Freddie Mac guidelines and may vary. All loans subject to underwriting review. Information provided is for educational purposes only and does not constitute a loan commitment or guarantee of financing.