Do I have to get a Commercial Loan?

[Nick Tzenevrakis]

Hey BP, I have a question. I am trying to find my first deal here in Quincy IL, and am currently renting myself. One bank has told me that to purchase a property as a rental, it has to be a commercial loan. The variable rate  would require 20% down and is amortized over 15 years, maybe 20. Another realtor told me the same thing, If I'm going to buy a rental, I'll need to have a commercial loan. What are my options? I have about 10k at my disposal and am trying to get my first investment property under my belt. 

[Jon Holdman]

If this is a 1-4 unit property and you're buying it in your personal name, and you don't already have 10 mortgaged properties then you need to talk to more banks. If you have three or fewer mortgaged properties, you're buying in your name, and its a 1-4 unit property you should be easily able to find a bank that will do investor loans. You don't need any charts or graphs or any sort of business plan. You do need a 20% down payment for a SFR, 25% down for 2-4 units, good credit, and income from other sources to qualify for the loan. Conventional loans with 30 year fixed rate terms are readily available with those qualifications.

If you don't have the required down payment (plus closing costs), then a low-down FHA loan and house hacking (occupying one unit of a multi) is the way to go.