Investment property rental home representing conventional and non-QM loan rules

Understanding Investment Property Loan Rules in Colorado

Investment property loan rules are very different from owner-occupied mortgage guidelines, and they become even more important as your rental portfolio grows. Real estate investors in Centennial, Denver, Parker, Castle Rock, and across Colorado often ask how many properties they can finance, what income counts, and when conventional loans stop working.

This article explains how conventional investment loans compare to Non-QM options, and how Fannie Mae rental property limits impact investors who want to scale.

Conventional Investment Property Loan Guidelines

Conventional loans for investment properties are governed by Fannie Mae and Freddie Mac guidelines.

Key Conventional Investment Rules

  • Maximum of 10 financed properties per borrower nationwide
  • Includes primary residence, second homes, and all financed rentals
  • Minimum 15 to 25 percent down payment depending on property type
  • Higher credit score requirements than owner-occupied loans
  • Limited flexibility with complex income or multiple LLC structures

Once an investor reaches 10 financed properties, conventional financing is no longer an option under current Fannie and Freddie rules.

Fannie Mae Rental Portfolio Limits Explained

Fannie Mae counts all financed real estate owned by the borrower, not just rental properties.

What Counts Toward the Limit

  • Primary residence
  • Second homes
  • Single-family rentals
  • Condos and townhomes
  • 1 to 4 unit residential properties

Commercial properties with five or more units are excluded, but most residential investors hit the 10-property cap sooner than expected.

This is where many Colorado investors feel stuck unless they understand their alternatives.

Non-QM Investment Loans: An Alternative for Portfolio Investors

Non-QM loans are designed for investors who exceed conventional limits or have non-traditional income.

Common Non-QM Investment Loan Features

  • No limit on number of financed properties
  • Qualification based on DSCR (Debt Service Coverage Ratio)
  • Personal income documentation often not required
  • LLC ownership allowed in many programs
  • More flexible underwriting guidelines

DSCR loans typically qualify borrowers based on the property’s rental income compared to the mortgage payment, not the borrower’s personal tax returns.

This makes Non-QM loans especially attractive for seasoned investors scaling rental portfolios across Colorado.

Conventional vs Non-QM Investment Loans at a Glance

Conventional Loans Are Best If You:

  • Own fewer than 10 financed properties
  • Have strong W-2 or tax return income
  • Want lower interest rates and fees
  • Plan to hold properties long-term

Non-QM Loans Are Best If You:

  • Own more than 10 financed properties
  • Use LLCs or partnerships
  • Want faster closings and simpler income review
  • Focus on cash flow rather than personal income

Neither option is universally better. The right strategy depends on your long-term investment goals.

Down Payment and Reserve Requirements

Investment property loan rules typically require stronger financial reserves.

Typical Requirements

  • 6 to 12 months of reserves per property
  • Larger reserves for multi-property portfolios
  • Down payment sourced from verified assets

Non-QM lenders may allow reserves to be calculated differently, which can help investors preserve liquidity.

Why Strategy Matters for Colorado Real Estate Investors

Many investors unintentionally block future growth by using conventional loans too aggressively early on. A blended approach often works best.

Strategic planning can help:

  • Preserve conventional loan slots
  • Improve cash flow
  • Reduce documentation headaches
  • Support long-term portfolio growth

Understanding these investment property loan rules early allows you to scale intentionally rather than reactively.

Talk Through Your Investment Financing Strategy

Every investor’s situation is different. Whether you are buying your first rental or managing a large portfolio, understanding how conventional and Non-QM rules apply to your goals is critical.

If you want to review your current properties, future plans, and loan options, reach out anytime at (303) 670-0137 or rbaxter@choicemortgage.com or contact us.

For more educational articles on mortgage strategies, visit our blog.

Posted in DSCR Loans, Investment Property Financing, Non-QM Loans, self-employed Mortgages and tagged , ,