Advice on Getting a Lender/Financing

[Seth Roland]

Hello all,

I'm just starting out on this journey. I'm 24 and still in the "learning stage" but want to move forward on my first purchase in the next ~12 months. I want to narrow in on using the BRRRR strategy, but turnkey rentals are also intriguing. (I'm in the middle of Brandon Turner's book Rental Property Investing. Next is probably his book on Investing with No and Low Money Down. More book recs are welcome!)

My question for this post is about financing and finding a lender so I am ready when the time comes to buy my first property. I want to know how much I can get approved for and what steps to take to figure this out. My financial situation is somewhat unique, so I’m sharing the details below in case anyone can provide guidance.

1. I am self-employed. I run a business called Woodnotch (we make nice pens, if anyone needs one 😉). Most of my income is reinvested back into the business, which means my reported income is relatively low due to write-offs.

2. I have saved $25k over the last 18 months and continue saving $1500/month from my job. I also have another $25k investment coming back to me by the beginning of 2026.

3. I am co-owner of a $900k property and co-signer on the $400k refi loan. I am not the one making the payments, but it's still on my credit report.

My limited income, combined with being a co-signer on the loan, results in a less-than-ideal DTI ratio.

Under these circumstances, what type of loan or lender should I focus on? Are there options that are less dependent on reported income, such as a bank statement loan that I should be looking into?

Thank you for taking the time to read all this! Any advice or resources would be greatly appreciated.

[Jaycee Greene]

Hey @Seth Roland, welcome to the BP Forum! If money were no object, do you have a specific property (whether it's for sale or not) and address that would be an ideal first investment for you? Also, are you looking for turn-key properties or something along the lines of a "fixer upper"?

[Seth Roland]

Quote from @Jaycee Greene:

Hey @Seth Roland, welcome to the BP Forum! If money were no object, do you have a specific property (whether it's for sale or not) and address that would be an ideal first investment for you? Also, are you looking for turn-key properties or something along the lines of a "fixer upper"?

 Hi Jaycee, thanks for the reply. No, I don't have a specific property I'm looking at yet. I'm looking in the Tucson area just because that's where I live. Turn-key would be nice, but if I can get a bigger bang for my buck, I'm not against a fixer-upper if there is a good deal. I understand a fixer-upper would require a lot more work in accurately determining repair costs, finding good contractors, etc., but I think the learning experience would help set me up better for future deals.

[Jake Baker]

@Seth Roland

Loans like bank statement loans or DSCR (Debt Service Coverage Ratio) loans could be great options. These focus less on personal income and more on your business cash flow or the projected rental income of the property.

If you have a rehab project, you may want to start with a hard money loan and refinance into DSCR once you are done with the rehab. Hard Money typically funds 90% of the purchase price and 100% of the rehab on a draw schedule.

[Jaycee Greene]

Quote from @Seth Roland:

Quote from @Jaycee Greene:

Hey @Seth Roland, welcome to the BP Forum! If money were no object, do you have a specific property (whether it's for sale or not) and address that would be an ideal first investment for you? Also, are you looking for turn-key properties or something along the lines of a "fixer upper"?

 Hi Jaycee, thanks for the reply. No, I don't have a specific property I'm looking at yet. I'm looking in the Tucson area just because that's where I live. Turn-key would be nice, but if I can get a bigger bang for my buck, I'm not against a fixer-upper if there is a good deal. I understand a fixer-upper would require a lot more work in accurately determining repair costs, finding good contractors, etc., but I think the learning experience would help set me up better for future deals.

@Seth Roland Got it. What about something like this: https://www.redfin.com/AZ/Tucson/426-E-Blacklidge-Dr-85705/h...? I don't know the Tucson market at all, but this one was less than $250k with 3 bedrooms. Adding a 4th BR would really add some value.

[Seth Roland]

Thanks for your reply! I'll look into these options. I guess the next step would be to find lenders in my area that offer these types of loans. Are these loans that I could get pre-qualified for?

[Nicole Heasley Beitenman]

Quote from @Seth Roland:

Thanks for your reply! I'll look into these options. I guess the next step would be to find lenders in my area that offer these types of loans. Are these loans that I could get pre-qualified for?

I'd recommend finding local meetups as your next step. Become a regular. There's nothing more important in REI than building a solid network. You can get recommendations there.

I also recommend going through BP's HML directory. There's some traditional lenders in there, too. But if you're going after DSCR loans, it doesn't matter if you go the traditional lender route or not as long as the terms work for you. I keep a spreadsheet of every lender/lending company I encounter so I always have someone else I can try if my lender gives me a no: https://www.biggerpockets.com/real-estate-companies/hard-mon...

[Ko Kashiwagi]

Hi Seth,

Typically investors use hard money (purchase and rehab) and DSCR financing (long term financing for the refinance). Both of these financing can be obtained as long as you have good credit.

[Christian Rodriguez]

Hi Seth, welcome to BP!! Tucson local investor here. Did you check a next door comp that just went into contract? Its about 20k more but has 2 units. About the same price but smaller work scope/problems and 2 rents. It listed 11 days ago. So it went fast. Also adding a extra bedroom but not adding sq ft doesn't help much on ARV specially currently being under 1,500sq ft. If you need anything Im happy to connect. Good luck in your journey, you are on the correct path. I wish I started to look into RE at that age!

[Stevan Stojakovic]

Hi Seth! You mentioned you're reading books on the subject - that's always helpful. Educate yourself on investment fundamentals and understand lender criteria, such as minimum loan amounts and property requirements. Demonstrate seriousness by being ready to discuss specific deals with accurate details. Clarity shows commitment and improves your chances of obtaining funding, whichever property you choose.

Best regards, Stevan

[Bud Gaffney]

Try getting owner financed deals. You will be denied 999 out of 1,000 times. That ONE will change your life :) 

GO GET EM.

[River Sava]

Hey Seth, welcome to BP! 

Have you looked into DSCR loans? They are underwritten primarily based off of the property not the borrowe so your W2 nor DTI is relevant.

Also, I do love a nice pen...happy to connect with you!

[Seth Roland]

Quote from @Jake Baker:

@Seth Roland

Loans like bank statement loans or DSCR (Debt Service Coverage Ratio) loans could be great options. These focus less on personal income and more on your business cash flow or the projected rental income of the property.

If you have a rehab project, you may want to start with a hard money loan and refinance into DSCR once you are done with the rehab. Hard Money typically funds 90% of the purchase price and 100% of the rehab on a draw schedule.

 Hi Jake,

Thanks for the reply. I have heard that interest rates for a DSCR loan are generally 1-2% higher than conventional loans depending on the LTV ratio and credit score. Would you say that is accurate and if so, would it be worth pursuing a conventional loan first because of the higher cost of a DSCR loan? Thanks!

[Jaycee Greene]

Quote from @Seth Roland:

Quote from @Jake Baker:

@Seth Roland

Loans like bank statement loans or DSCR (Debt Service Coverage Ratio) loans could be great options. These focus less on personal income and more on your business cash flow or the projected rental income of the property.

If you have a rehab project, you may want to start with a hard money loan and refinance into DSCR once you are done with the rehab. Hard Money typically funds 90% of the purchase price and 100% of the rehab on a draw schedule.

 Hi Jake,

Thanks for the reply. I have heard that interest rates for a DSCR loan are generally 1-2% higher than conventional loans depending on the LTV ratio and credit score. Would you say that is accurate and if so, would it be worth pursuing a conventional loan first because of the higher cost of a DSCR loan? Thanks!

Hey @Seth Roland. What are you considering a "conventional" loan vs. a DSCR loan?

[Seth Roland]

Quote from @Jaycee Greene:

Quote from @Seth Roland:

Quote from @Jake Baker:

@Seth Roland

Loans like bank statement loans or DSCR (Debt Service Coverage Ratio) loans could be great options. These focus less on personal income and more on your business cash flow or the projected rental income of the property.

If you have a rehab project, you may want to start with a hard money loan and refinance into DSCR once you are done with the rehab. Hard Money typically funds 90% of the purchase price and 100% of the rehab on a draw schedule.

 Hi Jake,

Thanks for the reply. I have heard that interest rates for a DSCR loan are generally 1-2% higher than conventional loans depending on the LTV ratio and credit score. Would you say that is accurate and if so, would it be worth pursuing a conventional loan first because of the higher cost of a DSCR loan? Thanks!

Hey @Seth Roland. What are you considering a "conventional" loan vs. a DSCR loan?

By conventional, I mean a typical 30-year conforming loan with a 20% downpayment. And by DSCR loan, I'm thinking standard 30-year DSCR loan. Does that make sense? I'm just learning about the different types of loans and how they work so please correct my thinking if I'm not making sense. Thanks!

[Jaycee Greene]

Quote from @Seth Roland:

Quote from @Jaycee Greene:

Quote from @Seth Roland:

Quote from @Jake Baker:

@Seth Roland

Loans like bank statement loans or DSCR (Debt Service Coverage Ratio) loans could be great options. These focus less on personal income and more on your business cash flow or the projected rental income of the property.

If you have a rehab project, you may want to start with a hard money loan and refinance into DSCR once you are done with the rehab. Hard Money typically funds 90% of the purchase price and 100% of the rehab on a draw schedule.

 Hi Jake,

Thanks for the reply. I have heard that interest rates for a DSCR loan are generally 1-2% higher than conventional loans depending on the LTV ratio and credit score. Would you say that is accurate and if so, would it be worth pursuing a conventional loan first because of the higher cost of a DSCR loan? Thanks!

Hey @Seth Roland. What are you considering a "conventional" loan vs. a DSCR loan?

By conventional, I mean a typical 30-year conforming loan with a 20% downpayment. And by DSCR loan, I'm thinking standard 30-year DSCR loan. Does that make sense? I'm just learning about the different types of loans and how they work so please correct my thinking if I'm not making sense. Thanks!

For investment properties, DSCR and Conventional are somewhat interchangeable when it comes to loans. The differing factor, IMO, is whether you're working with an HML/PML or a traditional bank/credit union. The HML/PMLs generally have more "flexible" or "creative" lending terms (higher LTARVs and longer amort), but the trade off is higher interest rates. I know this can be confusing.

[Seth Roland]

Quote from @Jaycee Greene:

Quote from @Seth Roland:

Quote from @Jaycee Greene:

Quote from @Seth Roland:

Quote from @Jake Baker:

@Seth Roland

Loans like bank statement loans or DSCR (Debt Service Coverage Ratio) loans could be great options. These focus less on personal income and more on your business cash flow or the projected rental income of the property.

If you have a rehab project, you may want to start with a hard money loan and refinance into DSCR once you are done with the rehab. Hard Money typically funds 90% of the purchase price and 100% of the rehab on a draw schedule.

 Hi Jake,

Thanks for the reply. I have heard that interest rates for a DSCR loan are generally 1-2% higher than conventional loans depending on the LTV ratio and credit score. Would you say that is accurate and if so, would it be worth pursuing a conventional loan first because of the higher cost of a DSCR loan? Thanks!

Hey @Seth Roland. What are you considering a "conventional" loan vs. a DSCR loan?

By conventional, I mean a typical 30-year conforming loan with a 20% downpayment. And by DSCR loan, I'm thinking standard 30-year DSCR loan. Does that make sense? I'm just learning about the different types of loans and how they work so please correct my thinking if I'm not making sense. Thanks!

For investment properties, DSCR and Conventional are somewhat interchangeable when it comes to loans. The differing factor, IMO, is whether you're working with an HML/PML or a traditional bank/credit union. The HML/PMLs generally have more "flexible" or "creative" lending terms (higher LTARVs and longer amort), but the trade off is higher interest rates. I know this can be confusing.

 Ok, that makes sense. Thanks for explaining. I guess it boils down to finding out if I can qualify for a lower-interest loan with a traditional bank/credit union, and if not, making sure the math still works with a higher-interest loan.

[Jaycee Greene]

Yes. As long as you have a credit score of at least 620, an HML/PML should be a good option for you. However, if you have a score over 720 and good cash flow, a bank loan could be an option with a lower interest rate and hopefully lower monthly payment. You'll need to run a proforma to figure out where these shake out for you!

[Seth Roland]

Quote from @Jaycee Greene:

Yes. As long as you have a credit score of at least 620, an HML/PML should be a good option for you. However, if you have a score over 720 and good cash flow, a bank loan could be an option with a lower interest rate and hopefully lower monthly payment. You'll need to run a proforma to figure out where these shake out for you!

My score is around 760. I'd have to figure out what good cash flow is, but there's a chance I could be taken off the loan that I'm a cosigner on and it would help my DTI a lot.

[Jaycee Greene]

If you go the conventional/DSCR route, these are considered "Commercial" loans and the properties are referred to as "Non Owner-Occupied" and, as such, the cash flow of the property is most important, and your DTI is not generally included in the underwriting. DTI is generally only used for "Retail" or "Consumer" mortgages where you live in the property.

[Seth Roland]

Quote from @Jaycee Greene:

If you go the conventional/DSCR route, these are considered "Commercial" loans and the properties are referred to as "Non Owner-Occupied" and, as such, the cash flow of the property is most important, and your DTI is not generally included in the underwriting. DTI is generally only used for "Retail" or "Consumer" mortgages where you live in the property.

So a conventional/DSCR "commercial" loan doesn't necessarily mean higher interest than a "consumer" mortgage if it's coming from a traditional bank/credit union?

[Jaycee Greene]

it all depends on the credit scores, but consumer mortgages tend to have lower interest rates than commercial loans. But that is often an "apples to oranges" comparison unless you're going to live in the property/house hack.

[Seth Roland]

Quote from @Jaycee Greene:

it all depends on the credit scores, but consumer mortgages tend to have lower interest rates than commercial loans. But that is often an "apples to oranges" comparison unless you're going to live in the property/house hack.

Got it. Makes sense. And I am also considering house hacking so this is good to know. Thanks a lot for your time. I appreciate it!