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Interest-only loans let you pay just the interest for an initial period — typically 5 to 10 years. Your principal balance doesn't drop during that window.
Sacramento attracts investors and high-income borrowers who want lower payments now. This loan structure fits that profile well.
700+
Min Credit Score
20% minimum
Down Payment
5–10 years typical
IO Period
Non-QM
Loan Category
12 months typical
Reserves Required
Interest-Only Loans in Sacramento
These are non-QM loans. Lenders don't use standard Fannie Mae guidelines. Expect stricter credit and reserve requirements.
Most lenders want a 700+ credit score and 12+ months of reserves. Down payments typically start at 20%.
Local decision guide
Use this guide to connect interest-only loans eligibility, lender expectations, and local market factors before comparing payment options in Sacramento.
Interest-only loans let you pay just the interest for an initial period — typically 5 to 10 years. Your principal balance doesn't drop during that window.
Sacramento attracts investors and high-income borrowers who want lower payments now. This loan structure fits that profile well.
These are non-QM loans. Lenders don't use standard Fannie Mae guidelines. Expect stricter credit and reserve requirements.
Retail banks rarely offer interest-only products anymore. Wholesale lenders still do — and that's where brokers earn their keep.
At SRK CAPITAL, we shop 200+ wholesale lenders. That matters here. Interest-only pricing varies widely across lenders.
Most borrowers use interest-only loans for cash flow, not affordability. That distinction matters when structuring the deal.
Investors buying Sacramento rentals often pair IO with DSCR underwriting. It's a powerful combo for maximizing short-term returns.
A 30-year fixed fully amortizes from day one. An IO loan defers principal — freeing up cash for other investments.
ARMs also offer lower initial payments. But IO gives you more control over when principal reduction begins.
Sacramento has seen strong investor activity, especially in value-add rentals. IO loans fit landlords who want to hold and harvest cash flow.
As of April 2026, Sacramento remains a target market for out-of-state investors. Lower entry costs than the Bay Area make IO math work here.
Investors and high-income borrowers who want to maximize short-term cash flow. It's not a fit for buyers who need to build equity fast.
Payments reset to fully amortizing — principal plus interest. Monthly payments jump significantly, so plan ahead.
Yes. Most lenders require at least 20% down. Some programs require more depending on credit and reserves.
Yes. Investors often use IO loans paired with DSCR underwriting. The property's rental income helps qualify the deal.
Yes, and a broker is often your best path. Retail banks rarely offer IO products — wholesale lenders do.