California investment properties offer strong rental income potential — but financing them requires navigating stricter underwriting standards than owner-occupied loans. Here’s what changes when you’re buying rental property in 2026.
Down Payment Requirements
Investment property loans require larger down payments than primary residence loans. Standard requirements in 2026: single-family rental (SFR) — minimum 15% down (20% to avoid PMI); 2-4 unit property — 20–25% down; 5+ unit property (commercial loan) — 25–30% down. Higher down payments mean better rates and terms.
Rate Premium for Investment Properties
Expect investment property mortgage rates to run 0.50–0.875% higher than comparable owner-occupied rates. On a $1M loan at 7.25% vs 6.75%, that’s $3,500/year in additional interest. DSCR loans (described below) can sometimes offer competitive alternatives.
Conventional Investment Property Loans
Fannie Mae and Freddie Mac conventional loans allow up to 10 financed investment properties. Income qualification uses 75% of market rent (per the lease or appraiser’s rental schedule) as income. DTI limits are stricter: typically under 45%.
DSCR Loans — The Investor’s Tool
Debt Service Coverage Ratio (DSCR) loans qualify based on the property’s income, not yours. If the monthly rent ≥ monthly mortgage payment, you qualify. Most DSCR lenders require a ratio of 1.0–1.25. No personal income documentation needed. In California markets where rents are strong relative to prices, DSCR loans are increasingly popular.
California-Specific Considerations
California has strict landlord-tenant laws including AB 1482 rent control (applies to most properties over 15 years old), just-cause eviction requirements, and required rent board registrations in many cities. These don’t affect mortgage qualification but affect cash flow projections. Marin County and Bay Area rents ($2,500–$5,000+ for a 2BR) are among the strongest in the nation for DSCR qualification.
Ready to get started? Call DiVita Home Finance at (800) 239-1108 or schedule a free consultation. We’re California mortgage brokers with 20+ years of experience in Marin County, the Bay Area, and statewide.
