First rental home loan financing

[Justin Heileman]

Hi, 

New to Bigger Pockets! I am investing in my first rental property, which is a single family home. I’m trying to decide on financing and what type. My question is what type of loan financing does everyone suggest and why?

Thank you for any and all suggestions and knowledge. Much appreciated

[Brandon Beardt]

Hi Justin,

Congrats on investing in your first rental property! Deciding on a type of financing depends on a variety of factors but it mostly depends on your situation and goals for the property. Are you trying to purchase? If so, how much do you have/ are willing to put down? Do you have enough for reserves? Short term or long term rental property? Do you qualify for conventional financing or would you need to go through alternative financing (like NON-QM loans)? Etc, etc. Questions like these will play a huge role in finding your answer. Conventional financing usually has better rates/terms, but can be difficult to qualify for with some investors for various reasons (Debt to income ratio's, FICO, etc). As of late, we're seeing a lot of activity in DSCR loans, where qualification is simply based on if the property cash flows (Monthly Rent > Monthly PITI). These types of loans are big with investors who can't qualify conventionally and don't want to provide income verification docs (make little income on paper), and they also have 30 year amortization which is huge. Hope this helps! If you have any questions, don't hesitate to reach out. Good luck!