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Standard agency financing on single-family rentals. The cheapest investor money in the residential market — for the right ten properties.
Conventional NOO 1-unit is the workhorse of agency-backed investor lending. Fannie Mae and Freddie Mac will finance a single-family non-owner-occupied rental — purchase or refinance — at the tightest pricing available on any investment-property loan in the residential mortgage market. Tax-return income, paystubs, W-2s, and Schedule E rental income all qualify the borrower; the property is appraised against comparable sales the same way an owner-occupied home would be. The catch is that agencies cap the borrower at ten financed properties total, so the strategic question is not whether to use this product — it is how to sequence the ten you get.
For most investors building their first portfolio, this is the entry point. Single-family rentals are the easiest properties to underwrite, the easiest to lease, the easiest to manage, and they qualify for the best terms on the menu. If your file is full-doc clean and you have agency capacity, there is almost no scenario where another product beats it on price.
What it actually is
Conventional NOO 1-unit is Fannie Mae or Freddie Mac investment-property financing on a 1-unit non-owner-occupied home — single-family residence, warrantable condo, PUD, or townhouse. The borrower qualifies on full documentation: two years of personal tax returns (1040s with all schedules), W-2s, recent paystubs, and rental income from any existing rentals via Schedule E. Rental income from the subject property itself is calculated by the appraiser on Form 1007 (Single-Family Comparable Rent Schedule), then haircut by 25% for vacancy and maintenance — so 75% of the appraiser’s rent estimate counts toward qualifying income.
Vesting must be in personal name. Agency rules do not allow LLC vesting on conventional loans, full stop. If LLC vesting is non-negotiable for the deal, the file moves to DSCR and the borrower trades agency pricing for entity protection.
Who it is built for
- First-through-tenth rental property purchases — the agency-financed pipeline
- Cash-out refinances of free-and-clear single-family rentals to recycle equity
- Move-up buyers retaining a prior primary residence as a rental (the “keep the old house, buy the new one” play)
- BRRRR investors with agency capacity refinancing out of hard money into long-term financing
- W-2 borrowers and clean self-employed borrowers whose tax returns reflect real income (not heavy write-offs)
The basics
- Minimum down payment: 15% on a purchase (LTV cap 85%). The lowest down payment available on any investment property in residential lending.
- Cash-out refinance LTV cap: 75% — a $400K appraised property can pull cash out to a $300K loan balance at maximum.
- Minimum credit score: 680 (700+ unlocks the tightest pricing tier; sub-680 is generally not eligible).
- Reserves: 6 months of PITIA per financed property. If you own three rentals, you need 18 months of reserves cumulative across all three.
- Maximum financed properties: 10 (Fannie/Freddie cap, counted across all financed properties on your credit including primary and second homes).
- Eligible property types: Single-family residence, warrantable condo, PUD, townhouse. Manufactured homes are case-by-case.
- Rental income calculation: Form 1007 (subject property, market-rent estimate) on a purchase, or Schedule E on a refinance. 75% of gross rent counts after the agency haircut.
- Loan limits (2026): Standard conforming up to $832,500 in most counties; high-cost-area limit up to $1,248,750 in designated metros. Above that, the file moves to jumbo.
Three things to know going in
Insider Insight #1 — Reserves are checked per property, and they stack fast.
Six months of PITIA per financed property sounds reasonable on the first rental and gets painful by the fifth. A $2,500 PITIA × 6 months = $15K in required reserves per property. Five properties = $75K. Plan for this in parallel with the down payment, not after — investors who do not run out of pre-approval before they run out of properties.
Insider Insight #2 — Form 1007 is your friend on aggressive rents.
On a purchase, the appraiser estimates the subject property’s market rent on Form 1007 by pulling comparable rentals in the area. If you are buying in a market where rents have run faster than sales prices, the 1007 number often comes in higher than the seller’s old lease — which means more qualifying income for you. Submit a strong rent roll and recent comps from your agent with the file to support a higher estimate.
Insider Insight #3 — Sequence your ten before you blow them.
The 10-property cap is the most under-respected constraint in real estate investing. Investors burn agency slots on second homes, vacation properties, and personal-use cabins — then realize at property number 8 that they only have two slots left for actual rentals. If you plan to scale past 10 doors, finance everything that is not your primary residence as investment property and keep your second home/vacation property in cash or DSCR.
Real-world scenario
A South Florida W-2 borrower earning $145K base salary buys a $385K single-family rental in Pembroke Pines. She puts 15% down ($57,750), finances $327,250 at conventional NOO pricing, and the appraiser’s Form 1007 estimates the property will rent for $2,800/month. 75% of $2,800 ($2,100) is added to her qualifying income, easily clearing the DTI hurdle against the new PITIA. She brings $57,750 down + roughly $11K closing costs + $15K reserves (6 months PITIA at ~$2,500) = around $84K to close. Property leases for $2,950 the month after closing — $450/month positive cash flow on day one, and the file took 24 days to underwrite.
Quick FAQ
Can I use the projected rent to qualify if the property is vacant at closing?
Yes. The appraiser fills out Form 1007 estimating the market rent based on comparable rentals in the area, regardless of whether the property is currently leased. 75% of that estimate counts toward qualifying income. If the property has an active lease at closing that lease rent is used instead.
Does my primary residence count against the 10-property cap?
Yes. The 10-financed-property limit is total — primary residence, second home, vacation property, and every rental all count.
Can I close in an LLC?
No. Conventional Fannie/Freddie loans require personal-name vesting. If LLC vesting is required, the file goes to DSCR.
How is rental income calculated on a refinance of a rental I already own?
The lender uses the most recent year’s Schedule E from your tax return. Net rental income is calculated, then depreciation is added back as a positive adjustment — so a property showing a $4,000 paper loss with $6,000 of depreciation actually contributes +$2,000 to qualifying income.
Free pre-approval. Soft credit pull. Zero hit to your score.
Before you make an offer, you need to know what the bank will actually back you on. A real pre-approval — not a quick online estimate — gives you the loan amount, the program, the rate range, and the monthly payment in writing. We pull a soft credit report (no impact to your score), review your income and reserves, and run the deal through underwriting logic so you walk into a property tour or a 1031 exchange knowing exactly what you can close on.
For investors, this matters double. Listing agents on rental properties take cash buyers and pre-approved investor offers seriously — everyone else gets passed over. Get the pre-approval first, then go shopping with leverage.
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Aleksandra Vasic — Mortgage Loan Originator, NMLS #[YOUR NMLS HERE] | True Blue Lending NMLS #2380218 | Equal Housing Opportunity. This is not a commitment to lend. All loans subject to credit approval.