Most mortgage lenders want to see two years of W-2s, pay stubs, and tax returns. If you’re self-employed, own a business, or earn income through freelancing, you already know this creates a problem.
The issue isn’t that you don’t make enough money. The issue is proving it in a way that traditional lenders accept. You might clear $15,000 a month running an online business, but if you’re writing off expenses and showing minimal taxable income, conventional mortgage underwriters will reject your application.
This guide covers five financing options that let you buy rental properties without traditional income verification. These aren’t loopholes or risky strategies. They’re legitimate loan products designed for investors who make money differently from salaried employees.
1. DSCR Loans (Debt Service Coverage Ratio)
DSCR loans ignore your personal income completely. The lender only cares about one thing: can the property pay for itself?
Before diving into how these loans work, you need to understand what makes a smart property investment strategy in the first place. DSCR loans are a financing tool, but they work best when applied to properties that already make financial sense.
Here’s how it works. Let’s say you’re buying a duplex. You’ll rent out both units for $1,500 each, so that’s $3,000 in monthly rental income. The mortgage payment, property taxes, insurance, and HOA fees total $2,400 per month.
You divide the rental income by the debt obligations. That’s $3,000 divided by $2,400, which equals 1.25. That’s your DSCR.
A DSCR above 1.0 means the property generates enough rent to cover its expenses. Most lenders want to see at least 1.0, though some will go as low as 0.75 if you’re putting more money down.
The lender doesn’t ask for your tax returns. They don’t care about your business expenses or whether you have a job. They look at the rental income, confirm it makes sense for that area using an appraisal and rent comparables, and base the entire loan decision on those numbers.
You will need to put down 20% to 25% typically. Your credit score matters, usually needing to be above 660. But your personal income? Irrelevant.
This works especially well if you’re self-employed and write off significant expenses. Your tax returns might show $40,000 in income, but you’re actually taking home $120,000. A conventional lender sees the $40,000 and says no. LLC mortgage lenders that offer DSCR loans never look at it.
One thing to know: DSCR loans typically come with slightly higher interest rates than conventional mortgages, usually 1% to 2% higher. You’re paying for the flexibility of not documenting income.
According to the National Association of Realtors, investment property financing consistently carries higher rates than primary residence loans due to the increased risk lenders take on rental properties.
You can use these loans to buy properties through an LLC, which most real estate investors prefer for liability protection. Conventional mortgages don’t allow LLC purchases, but DSCR loans do.
The biggest advantage here is speed. Since there’s no income verification, the underwriting process moves faster. Some lenders can close in 10 to 14 days, allowing you to compete with cash buyers on good deals.
2. Bank Statement Loans
Bank statement loans prove your income using deposits in your bank account instead of tax returns. You submit 12 to 24 months of personal or business bank statements, and the lender calculates your average monthly income from your deposits.
This works well if you run a business with healthy cash flow but minimal taxable income after deductions. The lender sees money coming in consistently, which is what matters.
Here’s a real example. You run a consulting business. After writing off your home office, car, meals, and other business expenses, your tax return shows $35,000 in net income. But your bank statements show $8,000 to $12,000 depositing into your account every month.
A bank statement lender takes those deposits, applies a multiplier (usually 50% to account for expenses), and uses that as your qualifying income. So if you’re averaging $10,000 in monthly deposits, they’ll qualify you based on $5,000 in monthly income. That’s still way more than the $35,000 annual income ($2,917/month) your tax returns show.
The process requires more documentation than a DSCR loan. You’ll need to provide bank statements, a CPA letter confirming you’re self-employed, and potentially a profit and loss statement. But you won’t need tax returns.
Down payments typically range from 10% to 20%, depending on the lender and your credit profile. Interest rates run higher than conventional loans, similar to DSCR loans.
One catch: these loans work better for primary residences or second homes than investment properties. Some lenders offer bank statement loans for rentals, but DSCR loans are usually the better option for pure investment properties.
Bank statement loans make the most sense when you have strong cash flow, good credit, and want to finance a house hack situation where you’ll live in one unit and rent out the others.
3. Portfolio Loans from Local Banks and Credit Unions
Portfolio loans are mortgages that a bank keeps on its own books instead of selling to Fannie Mae or Freddie Mac. Because the bank isn’t following government-backed mortgage guidelines, they can set their own rules for who qualifies.
Smaller community banks and credit unions offer these most often. They know their local market and are more willing to look at your complete financial picture rather than just checking boxes on an underwriting form.
The approval process is more relationship-based. You’ll probably sit down with a loan officer and explain your situation. If you can show stable income through bank statements, contracts, or other documentation, and the bank believes you can repay the loan, they might approve you.
These loans work well for borrowers with complicated income situations. Maybe you’re a real estate agent who had a slow year in 2023 but closed a ton of deals in 2024. Or you recently started a business that’s doing well but doesn’t have two years of history yet.
Portfolio loans typically require larger down payments, often 25% to 30%. Interest rates vary widely depending on the bank and your situation, but they’re usually competitive with other non-conventional options.
The downside is that terms differ dramatically between lenders. One bank might offer a great rate but require 30% down. Another might do 20% down but charge a higher rate. You need to shop around, which takes time.
Start with banks where you already have accounts or business relationships. If you have $50,000 in a business account at a local credit union, they’re more likely to work with you than a bank where you’re a stranger.
Ask specifically about their portfolio loan programs for investment properties. Not all banks advertise these, and some loan officers don’t even know their bank offers them.
4. Seller Financing
Seller financing means the person selling the property acts as the bank. Instead of getting a traditional mortgage, you make payments directly to the seller over time.
This works when you find a motivated seller, typically someone who owns the property free and clear, doesn’t need all the cash upfront, and wants to avoid a big tax hit from selling.
Here’s how a typical deal might work. You’re buying a rental property for $200,000. You put down $40,000. The seller agrees to carry a note for the remaining $160,000 at 6% interest over 15 years. You make monthly payments of about $1,350 directly to the seller.
Your income doesn’t matter because there’s no bank involved. The seller decides whether they trust you to make payments based on your down payment, credit, and conversation. Some sellers won’t check credit at all.
The terms are completely negotiable. You might negotiate interest-only payments for the first two years while you stabilize the property. Or you could negotiate a balloon payment after five years, giving you time to refinance into a conventional loan once the property has appreciated.
Seller financing works best with properties that have been sitting on the market. If a house has been listed for 180 days with no offers, the seller is more likely to consider creative terms.
The main risk is if the seller still has a mortgage on the property. Most mortgages have a “due on sale” clause that lets the bank demand full payment if the property changes hands. If the seller carries back financing while still owing money to their bank, and their bank finds out, they could call the loan due.
Always work with a real estate attorney to structure these deals properly. You’ll need a promissory note, deed of trust or mortgage (depending on your state), and title insurance.
The other consideration is that you’ll probably need to refinance eventually. Most seller-financed deals include a balloon payment after 3 to 5 years. By then, you’ll need to either refinance into a traditional loan or sell the property.
If you want to explore remote opportunities with seller financing, consider reading about remote real estate investing strategies that let you find deals outside your local market where sellers might be more motivated.
5. Partnering with Someone Who Has W-2 Income
If you can’t qualify for financing on your own, bring in a partner who can.
This works particularly well when you have cash for the down payment and property management skills, but lack the income documentation lenders want. Your partner has the W-2 income and good credit but doesn’t have capital or time to manage properties.
You contribute the down payment and handle finding deals, managing renovations, placing tenants, and day-to-day operations. Your partner gets the loan in their name. You split ownership and cash flow according to whatever agreement you negotiate.
You’ll want a formal operating agreement that spells out exactly who contributes what, how profits and losses are split, who makes decisions, and what happens if someone wants out.
Most partners structure these as LLCs with membership percentages based on each person’s contribution. If you’re putting in $50,000 and doing all the work, while your partner is only providing their name and credit for the loan, you might negotiate 70/30 or 80/20 in your favor.
The loan will be in your partner’s name since they’re the one with qualifying income. The LLC owns the property. Your partner signs the mortgage documents, and both of you sign the operating agreement.
One important detail: the lender will know about the LLC structure. You need to be upfront about this. Some lenders won’t allow it. Others will require both LLC members to guarantee the loan personally.
The biggest risk with partnerships is relationship breakdown. Make sure you partner with someone you trust and get everything in writing before you buy the first property together.
Some investors use this strategy to build up a portfolio, then eventually refinance properties into their own name once they can document sufficient rental income from their portfolio.
Getting Started
If you’re self-employed or earn income in non-traditional ways, your best options are usually DSCR loans or portfolio loans from community banks.
DSCR loans are faster and more straightforward if the property’s numbers work. You need solid credit, a decent down payment, and a property that generates enough rent to cover its expenses.
Portfolio loans take more effort to find but can work for situations where DSCR loans don’t fit, like house hacking or properties that need renovation before they’ll cash flow properly.
Bank statement loans work well for primary residences but are less common for pure investment properties.
Seller financing and partnerships are situational. They work great when you find the right opportunity or the right person, but you can’t count on these as your primary strategy.
The most important thing is to stop waiting until you can qualify for conventional financing. If you’re making good money but it doesn’t show up the way W-2 income does, there are legitimate ways to get started with rental properties now.
