Thinking of buying a rental property? Your first question is likely, “How much can I borrow?” For an investment property mortgage, the math is different than for a primary home. Lenders focus heavily on the potential rental income to see if the property can pay for itself. Our guide—and free calculator—will show you exactly how it works in the US market.
(How Lenders Calculate Your Loan for a Rental Property)
When you use a standard mortgage calculator, it focuses on your W-2 income. But a rental property mortgage calculator uses a unique formula. Here’s what US lenders really care about:
- Potential Rental Income: Lenders will typically count 75% of your property’s expected monthly rent as qualifying income. This accounts for potential vacancies and maintenance costs.
- Debt-to-Income (DTI) Ratio: Your total debt payments, including the new investment property loan and your existing debts, should generally not exceed 36-45% of your gross monthly income.
- Larger Down Payment: For a non-owner-occupied rental property, you’ll usually need a down payment of at least 20-25%, which is higher than for a primary residence.
(The Easiest Way to Get Your Borrowing Power)
Manually calculating this with different interest rates and rent estimates is complicated. You need a tool designed for investors.
For a fast and accurate estimate, use our free US Rental Property Mortgage Calculator:
Calculate Your Investment Loan Amount Here
Our calculator at WyomingRenty is built for US real estate investors. Input your info to instantly see your potential borrowing power, estimated monthly payments, and how rental income affects your loan.
(Key Factors That Impact Your Loan Amount)
- Local Rental Market: Accurate rent estimates for the specific area are critical.
- Your Credit Score: A higher score helps you secure a better interest rate.
- Cash Reserves: Lenders often want to see you have enough savings to cover 6 months of mortgage payments on all your properties.
- Interest Rate: Investment property loans often have slightly higher interest rates than primary residence mortgages.
Frequently Asked Questions (FAQ)
Q: What is a good debt-to-income ratio for a rental property loan?
A: While it varies by lender, a DTI ratio below 45% is generally a strong target for qualifying for an investment property mortgage.
Q: How much income do I need to qualify for a rental property loan?
A: Your personal income must be high enough to cover your existing debts plus the new mortgage payment, especially if the property is vacant. Lenders also add 75% of the expected rent as income.
Q: What is the minimum down payment for a rental property?
A: The typical minimum down payment for a rental property mortgage from most US lenders is 20-25%. Some portfolio lenders may offer 15% with very strong financials.
