I’ve seen a lot of folks underestimate just how picky lenders get with rental property loans, especially if your credit isn’t spotless. A few years back, I helped a client who had a mid-600s score and a decent down payment—about 25%. Even with that, the lender wanted to see extra reserves and scrutinized every line on his credit report. It took some persistence and a bit of rate shopping to get him approved, but the terms weren’t as favorable as they would’ve been with a higher score.
One thing that stood out: even a small improvement in credit (like paying down a credit card or two) made a noticeable difference in the offers he received. I wouldn’t say it’s impossible to get a rental mortgage with less-than-perfect credit, but you’ll probably face higher rates, stricter conditions, or both. Sometimes it’s worth waiting a few months to clean things up, even if you’re eager to jump in. The paperwork is a pain either way, but better terms can save you a lot over the long haul.
I get where you’re coming from—lenders definitely love to play detective when it comes to rental property loans. But honestly, I’ve seen folks with “meh” credit still land decent deals, especially if they’re willing to look beyond the big banks. Credit unions, local lenders, or even some portfolio lenders can be way more flexible than the usual suspects. Sometimes they care more about the property’s cash flow than your FICO score.
Not saying you’ll get rock-bottom rates if your credit’s in the 600s, but I’ve watched people snag loans with less hassle just by shopping around and being upfront about their situation. One guy I know had a 640, a solid down payment, and a rental in a good area—the lender barely blinked. The paperwork was still a circus (when isn’t it?), but the terms weren’t as punishing as you’d expect.
I do agree that cleaning up your credit can make a difference, but waiting isn’t always practical. If the right deal pops up, sometimes it’s better to jump in and refinance later once your score improves. Life rarely lines up perfectly for these things… and if you wait for “perfect,” you might be waiting forever.
Anyway, just my two cents—sometimes persistence and creativity beat perfection on paper. And maybe a little luck doesn’t hurt either.
- 100% agree with “the paperwork was still a circus (when isn’t it?)”
The paperwork was still a circus (when isn’t it?), but the terms weren’t as punishing as you’d expect.
- I’ve had lenders grill me harder than my last job interview, but like you said, if the numbers on the property work, they’ll look past a less-than-stellar score.
- One thing I’d add: sometimes those “creative” lenders want a bigger down payment to offset the risk. Worth it if the deal’s good, but gotta factor that in.
- Curious—has anyone actually had a lender care more about rental income than their own W2? I’ve heard stories, but never seen it firsthand…
I’ve actually had the opposite experience—most lenders I’ve dealt with still lean hard on W2s or tax returns, even when the rental income is solid and documented. They’ll count some of it, but never as much as I’d hoped. Maybe it’s different with DSCR loans, but in my experience, traditional lenders just aren’t that flexible. If you’re banking on rental income carrying the deal, it’s worth double-checking how much they’ll actually count before you get too far.
If you’re banking on rental income carrying the deal, it’s worth double-checking how much they’ll actually count before you get too far.
That’s been my experience too—traditional lenders rarely give full credit for rental income, even with a strong lease in place. DSCR loans are supposed to be more flexible, but they often come with higher rates or stricter down payment requirements. Have you tried working with a local credit union? Sometimes they’ll look at the whole picture, not just the W2s. It really depends on the underwriter and their appetite for risk.
