Investing in real estate can be the best way to build wealth in California, where property values are high, a conventional loan is a good financing option for investors. Unlike government-backed loans such as FHA or VA loans, conventional loans provide flexibility for purchasing rental properties or vacation homes. Here’s what you need to know about using a conventional loan for investment properties in California.
Conventional Loan Requirements for Investment Properties
When buying an investment property with a conventional loan, lenders typically have regulated requirements compared to primary residences:
• Higher Credit Score
Lenders require a minimum credit score of 680 — 700 for investment properties.
• Larger Down Payment
You’ll need at least 15 — 25% down, depending on the lender and property type.
• Debt-to-Income (DTI) Ratio
A DTI below 45% is preferred, meaning your total monthly debt should not exceed 45% of your gross income.
• Cash Reserves
Many lenders require six months or more of mortgage payments in savings.
Interest Rates
Conventional loan limits vary by cities in California. In 2025, the conforming loan limit for most areas is $766,550, but in high-cost regions like San Francisco or Los Angeles, it can go up to $1,149,825.
Since investment properties are riskier for lenders, interest rates are usually 1% higher than for primary residences.
Benefits of Using a Conventional Loan for Investment Properties
• No Mortgage Insurance
If you put 20% down, you can avoid this by reducing your costs.
• Multiple Property Financing
Conventional loans don’t have a limit on the number of financed properties.
• Fixed or Adjustable Rates
Investors can choose between fixed-rate stability or lower initial payments with an adjustable-rate mortgage.
Final Thoughts
Using a conventional loan for investment properties in California can be a smart idea if you meet the financial requirements. By securing competitive financing, investors can build long-term wealth in one of the most dynamic real estate markets in the country.
Leave a Reply