Just accepted the counter offer, What next?

Question

We are new investors, just starting out.  We were pre approved for a commercial loan, but should we try for conventional? Or something else?  We paid off the conventional loan on our primary residence a few years ago, and we have no experience with alternate financing options.  The property we are purchasing is a  3 unit residential house in Maine.

Nichola Wilson · Answer

Thank you all!  I was told by a lender that because we are not planning to live in the house that we would need a commercial loan.  This seems odd to me as well, which is why I needed advice.  DTI is not a problem, nor is credit score.

Erik Estrada · Answer

Commercial loan wouldn't make sense for a 3 unit, unless you are running into DTI issues. Did you go with this loan because you don't report enough income?

Brandon Beardt · Answer

Deciding between a commercial or conventional loan sort of depends on your risk tolerance what you can expect with the process. What was the reason you originally sought after a commercial loan? Are you having DTI qualification issues? Are you trying to avoid having the loan report on your credit? I recommend comparing the rate and terms of the commercial loan to conventional financing, apples to apples so you can get a better idea of the difference between the two. Commercial will be more expensive, but if you prefer the benefits of going with alternative financing over conventional, then that's up to you to decide. Best of luck!

Scott E. · Answer

I'm also not sure why you are using a commercial loan for a 3 unit.

But you should call a big bank, a local credit union, and a mortgage broker. Have each of them evaluate your deal and give you their best financing option.

Doesn't really matter if it's commercial, conventional, or something else. The terms are what matter to you (fixed vs adjustable, rate, IO vs fully amortized, prepay, etc)

Frank Avallone II · Answer

Hi @N Wilson,

Not sure why you would need a commercial loan for a 3 unit residential home? I think you should certintely talk to another lender or two in order to see what other options you have. Should be able to do this with 25% down investment conventional loan.