Can rental income be used to qualify for a commercial mortgage?

Yes — for commercial income-producing properties, the primary qualifying metric is typically the Debt Service Coverage Ratio (DSCR), which measures the property's net operating income against the proposed debt payment. The borrower's personal income is secondary in most commercial underwriting scenarios.

What credit score is needed for a commercial loan?

Most commercial lenders require a minimum score of 650–680 for the guarantor. SBA loans typically require 680+. DSCR loans for investment properties typically start at 680. Hard money and bridge lenders are more flexible on credit and focus primarily on the property and equity position.

How much down payment is required for an investment property?

Conventional investment property loans typically require 15–25% down depending on the number of units and the lender. DSCR loans typically require 20–25% down. FHA loans require only 3.5% down for 2–4 unit properties where the borrower occupies one unit. Hard money loans often allow 30–35% LTV.

Can I use a DSCR loan for a short-term rental (Airbnb) property?

Yes. Many DSCR lenders accept short-term rental income verified through Airbnb/VRBO income history or market STR rent estimates. Bakersfield has growing Airbnb demand from oil industry visitors, hospital proximity, and local events. Dan works with lenders who specifically accommodate STR income for Kern County properties.

Can I use future rental income to qualify for a mortgage?

For conventional and FHA loans on investment properties, lenders use the appraiser's market rent estimate (from a 1007 rent schedule), not actual signed leases, for properties not yet rented. DSCR loans use the same appraiser market rent to calculate the DSCR ratio. You do not need an existing tenant in place to qualify.

Investment Property Reserve Requirements: How Much Cash Must You Keep?

One of the most overlooked requirements in investment property financing isn't the down payment, it's the reserves. Lenders want to see that after you close, you still have liquid assets available to cover several months of housing payments. And for investors with multiple properties, those requirements compound fast.

Here's what you need to know before you start making offers.

What Are Mortgage Reserves?

Reserves are liquid or near-liquid assets you hold after closing. They're measured in months of PITIA, your principal, interest, taxes, insurance, and HOA (if applicable). The lender wants proof that if your tenant leaves or a major repair comes up, you can still make mortgage payments without missing a beat.

Reserves don't go toward the purchase. They're separate from your down payment and closing costs. A buyer who scrapes together exactly enough for a 25% down payment and closing costs, with nothing left, will likely be declined.

How Much Is Required?

For a single investment property, most conventional lenders require 6 months of PITIA in reserves after closing. FHA and VA don't typically require reserves for primary residences, but those programs generally don't apply to investment properties anyway.

For borrowers who own multiple financed properties, the reserve requirement escalates. Fannie Mae requires 2% of the unpaid balance on each additional financed property (not just the one being purchased). If you own three other investment properties with combined balances of $900,000, Fannie wants to see $18,000 in reserves for those three properties, on top of 6 months for the new purchase.

What Counts as Reserves?

Checking and savings accounts count at full value. Retirement accounts (401k, IRA) typically count at 60–70% of their vested balance, since early withdrawal penalties would reduce their accessible value. Investment and brokerage accounts count at 70% of market value. Cash value of whole life insurance counts.

What doesn't count: money that needs to be sold with a long settlement timeline, equity in real estate (unless you're doing a cash-out), or funds that came from a recent unsourced deposit that can't be documented.

Reserves vs. Liquidity: Why Investors Get Tripped Up

Many successful investors are asset-rich but cash-light. Their net worth is in real estate equity, but their liquid reserves are modest because they're always deployed into the next deal. This creates real qualification challenges because conventional mortgage underwriting requires liquidity, not just net worth.

Strategies to address this include drawing down a HELOC (the cash is liquid once drawn), partial 401k withdrawal or loan, or holding back some proceeds from a previous sale in liquid form rather than rolling immediately into the next property.

Common Mistake: Not Counting the New Property's Payment When Calculating Reserves

When lenders calculate how many months of reserves you need, they include the payment on the property you're buying, not just your existing properties. Missing this in your liquidity planning can leave you short at closing.

Investment Property vs. Primary Residence

Reserve requirements are meaningfully stricter for investment properties than primary residences. A primary home purchase may require 0–2 months reserves depending on the program and loan-to-value. An investment property requires 6 months as a baseline, plus the multi-property reserve calculation if applicable. This distinction often surprises first-time investors who've only experienced residential lending.

Bottom Line

Reserves are not a technicality, they're a core part of investment property underwriting. Plan for 6 months of PITIA in liquid assets after closing, account for additional reserve requirements on any other financed properties you own, and don't confuse net worth with the liquid assets lenders actually count. Build this into your deal math from the beginning, not at the closing table.