Financing first deal with a traditional mortgage

[Account Closed]

I am a new investor looking to purchase my first rental property within the next 1-3 months. I am a little confused because I have heard many people say that the first couple deals they just use standard financing to purchase the home. However I have spoken with the bank and they claim that because it would be for a rental property I could not use a traditional mortgage and would instead have to do a commercial loan. Am I missing something?

[Mark F.]

@Account Closed  What kind of property are you buying? If it's 5 units or more, then it falls under commercial financing. Residential financing is for 4 units or less. It sounds like the person you talked with either didn't completely understand what you needed or they were using their own definitions. They might consider any rental loan "commercial" even though that's not an industry-standard definition. 

If you're buying a residential property (4 units or less), you want to ask for a non-owner occupied residential mortgage. The vast majority of traditional mortgage lenders offer these. You'll likely need at least 20% down and will need to verify that you have at least 6 months PITI (principal, interest, taxes, and insurance) in the bank as reserves (over and above your down payment).

Hope this helps!