Loan types for first rental property

[Michael Klaus]

My wife and I are interested in purchasing our first rental property and are looking for ways to finance. We have a decent amount of capital saved but don't want to sink 20% down on a property. We purchased our first owner occupied home at 5% down this past April where we currently live. I understand that type of financing may not be available for rental properties, correct? However, I have heard about portfolio loans but admit my knowledge on the matter stops at the name. Thanks in advance!

[Mike McCarthy]

The best loan you can get is the FHA with 5% down. But as you stated, it needs to be owner-occupied. So you can either live there for 2 years and go buy/live-in another and keep going like that. You can also ‘house hack' with an FHA loan in a duplex/tri/quadplex and live in one... but you need to have the right attitude to survive that :)

Most other loans require 15-25% down these days. Very few banks will wiggle on that because of laws and risk aversion. You may be able to find someone to loan you hard money for less down, but the interest rate/points will definitely be higher.