Real Estate Investor Loans

The past few years have been some of the more challenging in recent memory for real estate investors. Mortgage rates rose to levels we hadn’t seen in two decades, sales volumes hit decade lows, and investor confidence was tested due to the lack of inventory. Many landlords and flippers shifted into “wait-and-see” mode, holding cash on the sidelines as uncertainty loomed.  Now, as we move through Q3 2025, the landscape is starting to shift. Mortgage rates have pulled back from their highs, falling into the 6s. That has broken through a key psychological barrier and is beginning to coax some buyers back into the market. Inventory is rising in some markets, and opportunities are opening up in select regions. Builders are increasingly leaning on investors to help move homes. This is neither the free-for-all market of 2021 nor the fully frozen market of 2023. We’re in a middle ground—a transitional phase where disciplined investors can find real advantages.  For those willing to do the work on underwriting, financing, and market selection, the next 12 months will present some of the best opportunities in years. At LendingOne, we have a front-row seat to these shifts, working with thousands of active investors across the U.S. Here are the key dynamics I see shaping today’s housing market and what they mean for your investment strategy. Deal Flow Is Picking Up Again One of the clearest signals this quarter is that activity is rebounding with consumers.. Purchase and refinance applications have risen as mortgage rates slipped back into the low 6s. That small shift matters: buyers who had been sidelined in frustration are starting to re-engage.  For investors, this means more chances to find motivated sellers—and in some cases, buyers willing to transact at reasonable terms. While transaction volume remains below pre-2020 levels, the bottoming out appears to be behind us. Regional Divergence Remains Wide  Not all markets are moving in lockstep. Florida, especially parts of Southwest Florida, continues to experience more pronounced weakness. Inventory levels there are heavier, and sellers are facing more pressure to cut prices.  Meanwhile, the Midwest and Northeast remain relatively stable, offering steadier rent and occupancy trends. Out West, deeper suburban areas of Phoenix, Dallas, and Austin still face builder pullbacks and higher unsold inventory, creating both risk and opportunity depending on an investor’s entry point.  The lesson is simple: market selection matters more than ever. Builders Are an Increasing Source of Opportunity  Homebuilders are recalibrating strategies, and investors are directly benefiting. From bulk deals on finished homes to marketplaces like Lennar’s new investor platform, we’re seeing more opportunities to acquire product straight from the builder.  This trend isn’t limited to institutional players. Even smaller investors can benefit by building relationships with local and regional builders who may be motivated to move inventory before year-end. For flippers and landlords alike, builder channels could become one of the more compelling ways to source deals in the coming quarters. Financing Conditions Offer Some Breathing Room  While capital is not as low as it was during the Covid era, it is more predictable than it was a year ago. The Federal Reserve’s recent decision to lower interest rates and outline a clear path forward has provided buyers with significantly more confidence in both rates and the overall market. Rates in the 6s have changed the mindset for both buyers and sellers. At LendingOne, we’re seeing stronger loan demand as investors move off the sidelines.  Rental Market Dynamics Still Favor Long-Term Holders  Despite the noise around the for-sale housing market, rental demand has remained resilient. Rising household formations and affordability constraints continue to funnel renters toward single-family homes. Build-to-rent remains a strong segment, although much of the new supply is concentrated in specific metropolitan areas.  For investors focused on buy-and-hold strategies, the fundamentals still look supportive. Rent growth has cooled from peak levels, but occupancy and tenant demand are holding firm—particularly in markets with steady job growth and less overbuilding. Positioning for 2026  Increasing supply and reduced rates will create openings for disciplined investors. The winners will be those who stay patient, keep capital flexible, and lean into opportunities created by regional imbalances and motivated sellers, particularly at the end of the year.  At LendingOne, our focus remains on helping investors move with confidence. Whether it’s financing a flip, a rental portfolio, or a new acquisition strategy, we’re here to provide the capital and partnership needed to execute in this environment.  The past few years have reminded us that cycles always turn. As we head into 2026, I believe those who stay active today—selectively and strategically—will be best positioned to benefit from the next upswing.

In the last few months, national home price growth has nearly plateaued, transactions have remained moderate, and active inventory levels have continued to increase. But for strategic real estate investors, these same trends are windows of opportunity for great deals—whether in Sun Belt metros where supply has surpassed pre-pandemic 2019 levels, or in the Northeast and Midwest where tighter markets continue to support steady home price appreciation.   Affordability challenges are front and center in today’s housing market, with elevated mortgage rates and high home prices continuing to weigh on demand, even as rates recently dipped to their lowest level of 2025 in September. However, those same headwinds are producing more motivated sellers and openings for single-family real estate investors. Every month, investors are hit with a flood of new housing market data points to consider. Each data point helps paint a picture of the current state of the U.S. housing market, but there are a few signals that are essential for savvy real estate investors to pay attention to.  To cut through the noise and help you stay up to date on what’s happening in today’s housing market, here’s LendingOne’s September 2025 market recap. Inventory: Buyers Gain Leverage in Select Metros Active listings have rebounded substantially from pandemic-era lows, though national inventory remains 11% below pre-pandemic 2019 levels. However, the real story lies in regional variation. Sun Belt boomtowns like Cape Coral and San Antonio have seen inventory bounce above pre-pandemic norms, giving buyers more leverage—especially with builders cutting deals to move unsold spec homes. Among the nation’s 200 largest housing markets, 80 metro areas now have active inventory above 2019 pre-pandemic levels.  By contrast, supply in the Northeast and Midwest remains tight, keeping sellers in control. In total, 24 major metros are still at least 50% below their 2019 inventory levels. Among the largest 200 metros, these are the five with the highest inventory levels relative to August 2019: Killeen-Temple, TX: 93.9% Punta Gorda, FL: 91.7% Colorado Springs, CO: 88.0% Huntsville, AL: 87.1% Waco, TX: 86.7% Among the largest 200 metros, these are the five with the lowest inventory levels relative to August 2019:  Bridgeport-Stamford-Danbury, CT: -75.8%  Peoria, IL: -74.2%  Hartford-West Hartford-East Hartford, CT: 72.6%  Norwich-New London-Willimantic, CT: -70.3%  Champaign-Urbana, IL: -67.5% Single-Family Home Prices: Broad Softening but Not Uniform Nationally, single-family home price growth from August 2024 to August 2025 was nearly flat at +0.3%, a sharp deceleration from the +3.1% pace recorded from August 2023 to August 2024. The stall reflects the squeeze of affordability—mortgage rates remain elevated, price levels are still historically high, and more listings are coming online in many metros.  Sun Belt markets, where supply has grown the most, are adjusting as local incomes struggle to keep pace. By contrast, the Northeast and Midwest remain supply-constrained, helping to stabilize prices and, in some cases, support modest gains. These are the top five U.S. metros for year-over-year single-family price growth: Peoria, IL: +8.0% Rockford, IL: +6.7% Appleton, WI: +6.5% Erie, PA: +6.3% Utica, NY: +6.2% New Construction: Permits Signal Builder Caution Unsold completed homes reached their highest level since 2009—the July figure (121,000 unsold completed new homes) is the highest level since July 2009 (126,000). Because of this buildup, single-family and multifamily permitting slowed in August, reflecting a cautious stance among builders. Year-over-year (August 2024 to August 2025) change for residential permits: Single-family homes: -11.5% Multifamily (2 to 4 units): -7.0% Multifamily (5 units or more): -9.6%  Nationally, permit volumes remain above pre-pandemic lows but are well off peak 2021 levels, showing that builders are moderating to prevent a bigger inventory overhang. The pullback is sharpest in Sun Belt metros, where affordability pressures and resale competition have weighed most heavily on demand. Mortgage-Free Ownership: A Growing Cushion The 2024 American Community Survey results were released by the U.S. Census Bureau this month, and LendingOne’s analysis revealed a striking demographic shift that continues to reshape the market: a record-high 40.3% of U.S. homeowners are now mortgage-free.  That’s up from 39.8% in 2023 and 32.8% in 2010. Demographics are a main driver of the rise. The massive Baby Boomer generation has aged into retirement, and more than half (54%) of mortgage-free homeowners are now over 65 years old.  This dynamic has created a buffer for equity-rich homeowners, adding a layer of stability to the broader U.S. economy even as affordability remains strained. Investor Spotlight: Fix-and-Flip Sentiment Holds Steady Home flipping activity fell sharply after the Pandemic Housing Boom ended in 2022, as higher rates and tighter margins pushed many operators to the sidelines. But Q3 2025 data from the LendingOne–ResiClub Fix and Flip Survey shows the market has stabilized into a new phase: cautious, yet committed. More than half of flippers (56%) describe their local markets as strong, and 88% still plan at least one project in the next 12 months. Regional differences are very stark. While current market sentiment is lowest for flippers based in Sunbelt markets, these investors are also optimistic: 41% of flippers in the Southwest and 42% in the Southeast expect their market to strengthen over the next 12 months—the highest among all regions.  LendingOne analysts believe this suggests that investors see the current softness as temporary, with room for recovery as excess supply clears and demand stabilizes. Big Picture The September 2025 housing market has made one thing clear to investors: opportunities are still there, but they’re no longer spread evenly and require sharper targeting. In the Sun Belt, elevated inventory levels have tipped the balance slightly toward buyers, while falling permit activity shows builders are pulling back to avoid adding more supply into markets already digesting a backlog of homes.  At the same time, supply in the Northeast and Midwest remains constrained, keeping modest upward pressure on prices—though even there, the pace of growth is beginning to flatten.

If you’re a landlord or considering purchasing a rental income property, consider a debt service coverage ratio (DSCR) loan to fund your next purchase. A DSCR loan is specifically designed to finance rental properties and can be easier to qualify for than a conventional mortgage, as it leverages the property’s cash flow instead of a buyer’s income, tax returns, and W-2. This article will cover the finer points of DSCR loans, including their requirements, qualification process, and flexibility for real estate investors.   What is a DSCR Loan? DSCR loans are mortgages secured by the property’s rental income and do not require the buyer to provide the same documentation needed with a mortgage for owner-occupied properties. This feature is especially helpful for self-employed investors who may not have a conventional income stream or have been challenged to obtain financing through traditional banks. DSCR loans are specifically designed for residential income-producing properties and are quickly becoming the preferred option for investors purchasing income properties. Still, there are some considerations regarding DSCR loans: Only properties with one to four units are eligible for DSCR lending, as additional units in the building would classify it as “multi-family.” Most DSCR lenders prefer turnkey or stabilized properties, though some allow light rehab if the property is leased or stabilized quickly. Lastly, the property must be a business asset or income investment, meaning the owner cannot reside at the address.   How DSCR Loans Are Calculated DSCR loans are based on a calculation that assesses the property’s potential to cover its expenses. The calculation divides the property’s net operating income (NOI) by its total debt service (TDS) to obtain a number less than, greater than, or equal to 1.0.   DSCR = Net Operating Income (NOI) / Total Debt Service (TDS)   Net operating income is calculated by subtracting the total operating expenses from the gross rental income. Total debt service refers to the sum of all debt-related costs that the property is required to pay. The DSCR ratio is what tells the borrower and lender how much income the property is generating to cover (or not cover) its own expenses. DSCR > 1 means the property is generating enough income to cover its debt. DSCR = 1 means the property is just breaking even with enough income to cover its debt. DSCR < 1 means the property isn’t generating enough income to cover its debt, posing a greater risk for lenders.   For Example: DSCR = $150,000 / $100,000 = 1.5   This means the property generates $150,000 in income, with total expenses equal to $100,000. This results in a DSCR of 1.5, so the property yields 50% more income than what’s needed to cover its debt, making it a more acceptable threshold for a lender to consider financing.   DSCR Loan Requirements: What Lenders Look For + Refinance Outlook Recently, rates have eased into the mid-6% to 7% range on average, and liquidity from non-agency or non-QM channels has improved. At the same time, rents are increasing unevenly by metro area, and insurance costs remain elevated in some counties. Key factors driving uneven rent increases can include: Supply and demand. Migration patterns. Construction costs. Location desirability. Inflation. Post-pandemic changes. All of this is reflected in today’s DSCR underwriting. Lenders are pricing more competitively than in previous years, but they’re also scrutinizing expenses such as taxes and homeowners’ insurance that impact cash flow. Core DSCR requirements (what you’ll typically need) and LendingOne’s impact: Property & use: 1-4 unit single-family rentals (SFRs), townhomes, condos, and planned unit developments (PUDs); investment use only (non-owner-occupied). DSCR threshold: Many programs target a DSCR of ≥1.10-1.20, depending on the credit; some offer options for break-even or even sub-1.0 DSCR with compensating factors. Example: LendingOne’s core grid lists 1.10-1.20 minimums by FICO; separate programs advertise flexibility for break-even and negative cash-flowing properties. Always confirm program-specific guidelines. Leverage: This is program-dependent, but LendingOne, for example, offers up to 80% LTV on purchase or rate/term refi; up to 75% LTV on cash-out. Credit & experience: Program minimums vary; one representative grid shows a minimum FICO score of 680, with stronger credit resulting in a lower required DSCR and potentially reduced reserve needs. Some programs require experience with existing investment properties. Reserves & payment structure: Expect reserves (e.g., ~9 months PITIA), with portions sometimes collected at closing and potential waivers for higher FICOs. Prepayment options often include 1-5-year step-downs, which is vital if you plan to refinance. Appraisal & rents: Full appraisal with 1007 rent schedule; lenders qualify using the lesser of actual or market rent (caps may apply). Insurance & escrows: Escrows for taxes and insurance are standard. Hazard insurance (and flood, if applicable) is required; many lenders also require rent-loss coverage (e.g., six months). Rising premiums, especially in high-risk counties, can tighten DSCR, so get quotes early.   DSCR Loan vs. Other Investment Property Loans Choosing the right loan comes down to how the deal cash flows, how quickly you need to close, and how much documentation you are willing to provide. Of course, this is easier said than done, and verifying many variables can get overwhelming. This is how DSCR loans compare with other standard options. This table focuses on general patterns across lenders. Terms vary by program and market.   Loan type Qualifying focus Docs & credit Typical LTV & term Rate & fees (relative) Best fit DSCR Rental loan Property income (DSCR) is more than the borrower’s DTI Appraisal + rent schedule; credit & reserves reviewed ~75–80% LTV; 30-year fixed or ARM; IO options Higher than conventional; lower than most short-term loans Long-term holds when you prefer property-based underwriting Conventional (agency) investment mortgage Personal income & DTI Full income and asset docs; strong credit needed LTV caps vary by units and purpose; 15–30-year terms Lowest if you fully qualify Lower-cost debt for well-documented borrowers Bridge loan Asset + exit plan (sale or refinance) Appraisal and BPO; business plan; experience and liquidity Short term (~6–18 months); leverage varies Higher rates and points Fast acquisitions or seasoning before permanent debt Fix and Flip (rehab) loan After-repair value (ARV) and scope Budget, draws, inspections; experience helps Short term (~12 months); leverage tied to LTC or ARV Higher (construction risk priced in) Buy-rehab-sell or refi to DSCR after stabilization Portfolio or blanket rental loan Portfolio cash flow (global DSCR) Rent rolls, consolidated financials, entity structure Often up to ~75% LTV; 5–10-year terms (balloon or fixed and ARM) Middle of the pack Operators consolidating multiple rentals under one loan Disclaimer: This information is provided for educational purposes. Always check the current guidelines, fees, prepayment terms, and local insurance and tax impacts before bidding or refinancing.   Should You Use a Direct Lender, Broker, or Bank for Your DSCR Loan? When financing a rental, the company you work with can significantly impact the speed, pricing, and amount of paperwork required. This is how the three options differ and when each is most suitable.   What Is a Direct Lender? A direct lender is the company that funds the loan itself. In plain terms: The lender makes the loan; a broker does not. Brokers act as intermediaries who help you shop with multiple lenders. How does this play out with DSCR loans? Direct lenders primarily underwrite based on the property’s debt service coverage ratio, order the appraisal and rent schedule, and issue terms directly. Banks can also be direct lenders, but many DSCR programs are offered by non-bank lenders that specialize in investment properties. Banks engage in mortgage banking — originating, holding, or selling loans.   Example of a Direct Lender: LendingOne LendingOne is a direct private lender focused on real estate investors, offering DSCR rental loans among other investor products. It lends on non-owner-occupied 1-4 unit properties and provides an online application and borrower portal. For specifics on programs, see DSCR Rental Loans.   Comparing Direct Lenders, Brokers, and Banks Approval speed Direct lender: Often faster because underwriting, disclosures, and conditions stay in one shop. Broker: Timeline varies; brokers coordinate with a wholesale lender’s underwriting. Bank: Processing may be slower due to more thorough documentation and portfolio or committee reviews. Loan Variety Direct lender: Deep menu of investor-focused products (DSCR, bridge, flip) within its own credit box. Broker: Broad market access; can shop multiple wholesale lenders for niche scenarios. Bank: Strong for conventional or agency and portfolio products; may have fewer DSCR options. Rates and fees Direct lender: Competitive for its programs; pricing set in-house. Broker: Can help you compare offers; broker compensation and fees may apply in addition to lender fees. Bank: Often sharp pricing if you qualify under bank or agency rules. Documentation Direct lender: DSCR loans emphasize property income (from leases and market rent) plus credit, reserves, and entity documents. Broker: Documentation depends on the target lender’s program. Bank: Heavier personal income and DTI documentation for many programs. How to Decide Choose a direct lender if you want a streamlined DSCR process and clear, program-specific guidance from the funding source. Choose a broker if you want help shopping for multiple DSCR and investor programs with a single intake. Choose a bank if you easily qualify for conventional or portfolio terms and want potential relationship pricing or servicing under one roof.   Financing Options for DSCR Loans Within DSCR financing, loan structure directly impacts payment stability, cash flow, and when it makes sense to refinance. Here’s what investors should keep in mind: Fixed-rate (usually 30-year): Stable payment for the full term; good for long holds and budgeting. Often starts a bit higher than ARMs; you’d refinance to benefit from future rate drops. Adjustable-rate (5/6, 7/6, 10/6 ARMs): Offers a lower start rate, which is fixed for an initial period; then adjusts with caps. Works when you plan to sell or refinance in 3-10 years or expect rates to ease. Interest-only (IO) periods: Interest only for 5-10 years, then amortizing. Improves near-term cash flow and DSCR; no principal paid during IO; payment jumps when amortization begins. Some lenders size DSCR to the post-IO payment. Term & amortization: 30-year standard; some offer 40-year with an IO period. Confirm which payment (IO vs. post-IO) is used to qualify. Down payment/LTV: Purchases typically have a 75-80% LTV (approximately 20-25% down). Cash-out refinancing often caps lower. Results vary by DSCR, credit, reserves, property, and market. Prepayment: Step-downs are common (e.g., 3-2-1 or 5-4-3-2-1). Match the penalty window to your hold period. Recourse, entity, assumability: Most close to an LLC with personal guarantees; non-recourse exists at tighter terms. Assumability is lender-specific and not always offered. Short-term rentals: Many programs allow STRs but may underwrite to market rent or an average history. Model higher expenses (management, cleaning, vacancy) in DSCR.   DSCR Loan Pros and Cons DSCR Pros Easier qualification for many investors: Underwrites to the property’s cash flow rather than your personal income, tax returns, or W-2s — helpful for self-employed borrowers or those with complex finances. Faster path to scale: Because income docs are lighter, approvals can be quicker than traditional bank mortgages (still subject to appraisal and underwriting). Entity-friendly: Allows LLC or partnership ownership, making it straightforward to buy with partners and separate business from personal assets. Investment-focused: Explicitly designed for non-owner-occupied properties, aligning the loan with portfolio goals. DSCR Cons Higher cash to close: Down payments are often larger than conventional mortgages (and cash-out limits may be tighter). Pricing and fees: Expect higher interest rates, closing costs, and lender fees versus many bank and agency loans due to the risk profile and reduced personal income verification. Prepayment penalties: Many programs include a step-down prepayment, which can limit the flexibility of early sale or refinance. Not government-backed: Fewer protections than agency loans; terms vary by lender, and guidelines can change. Cash-flow risk: If rents soften or expenses rise, such as taxes, insurance, or HOA fees, the DSCR can fall below 1.0, increasing the risk of financial stress or foreclosure. Market fit matters: Not ideal for properties with unstable income or in volatile markets where vacancy or rent swings are common.   Is a DSCR Loan Right for You? DSCR loans offer incredible flexibility and are fast becoming the preferred loan vehicle for residential real estate investors today. Working with a lender well-versed in DSCR financing will give you the expertise and options you need to achieve your investment goals. Ultimately, DSCR loans may be a better option for self-employed investors, investment partnerships, or in scenarios where the property’s income potential comfortably exceeds its expenses. However, a conventional mortgage may be a more suitable and affordable choice for first-time buyers or anyone who plans to live in the property. For more information, explore the loans available for your next real estate investment. CTA button: Speak with a LendingOne Loan Advisor