5 Truths About Texas Investment Property Loans Every Investor Should Know

If you have already purchased a primary residence, you might think you know how the mortgage process works. But when you step into the world of real estate investing, the rules change completely.

Securing Texas investment property loans is a different ballgame than buying a home to live in. The approval process focuses less on “emotional appeal” and more on “math,” specifically how the numbers impact your cash flow and bottom line. Whether you are eyeing a duplex in New Braunfels or a single-family rental in San Antonio, understanding these financing shifts is critical to your success.

Here are five mortgage truths every Texas investor needs to know before making their next offer.

1. Investment Property Down Payments Are Different

One of the first shocks for new investors is the down payment requirement. You can’t use a 3% or 3.5% down payment like you would for a primary home.

For a standard Texas investment property loan, you typically need:

• 15% to 20% down for a single-family home.

• 25% down for 2–4 unit properties (duplexes, triplexes, fourplexes).

Lenders also look heavily at “reserves”—liquid cash you have left over after closing. As you acquire more properties, lenders may require you to have 2–6 months of mortgage payments saved for each property you own. Knowing your maximum “Loan-to-Value” (LTV) allows you to “back into” your purchase price so you don’t run out of liquidity.

2. Debt-to-Income vs. Property Cash Flow (DSCR)

Traditional loans look at your personal Debt-to-Income (DTI) ratio—your personal income versus your personal debts. But what if you are self-employed or have hit the limit on conventional loans?

Enter the DSCR Loan (Debt Service Coverage Ratio).

DSCR loans are a favorite for investors because they qualify you based on the property’s cash flow, not your personal tax returns.

• The Math: If the property rents for $2,000 and the mortgage payment (PITI) is $1,500, the DSCR is 1.33. Most lenders want to see a ratio of 1.0 or higher.

If the property pays for itself, you can often get approved without showing personal income documents. This flexibility makes Texas investment property loans based on DSCR extremely popular for self-employed investors.

3. Texas Taxes and Insurance Can Break a Deal

Texas is a high-property-tax state. Unlike your primary residence, your investment properties do not qualify for the Homestead Exemption, which caps annual tax increases.

When underwriting a deal, do not rely on the listing agent’s “pro forma” numbers. They often underestimate expenses. You must calculate your returns using:

• Non-homestead tax rates (often significantly higher).

• Landlord insurance policies (which differ from homeowner policies).

If you underestimate these, a property that looks like a cash cow on paper can quickly turn into a money pit.

4. Seasoning and the “BRRRR” Strategy

Are you planning to Buy, Rehab, Rent, Refinance, and Repeat (BRRRR)? You need to ask your lender about “seasoning” requirements.

Most banks require you to own the property for 6 to 12 months before you can do a cash-out refinance to pull your capital back out. If you try to refinance too soon, you might be stuck using the purchase price value rather than the new, appraised value (ARV).

Also, expect interest rates on Texas investment property loans to be 0.5% to 0.875% higher than primary residence rates. This is standard risk pricing, so build it into your profit margins.

5. Your Lender Should Be a “Financing Partner”

A standard bank teller won’t understand the nuances of a fix-and-flip versus a long-term hold. You need a lender who acts as a strategic partner.

A good financing partner will:

• Pre-underwrite your deals before you go under contract.

• Help you decide between a Conventional loan (lower rate) or a DSCR loan (easier qualification).

• Review your rehab budget and After Repair Value (ARV).

Navigating the requirements for Texas investment property loans is complex, so you need a specialist, not a generalist.

Ready to Review Your Next Deal?

Don’t guess on the numbers. Before you put in your next offer, let’s hop on a short “Deal Review” call. We can sanity-check your financing, estimate your payments, and ensure you have a clear exit strategy.

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