Conventional is hard to beat when the file fits.

Good rate.

Good terms.

Usually no prepay.

I’m not going Non-QM just for the sake of going Non-QM.

But this is where I think investors need to stop looking at rate only.

Take a 2-4 unit investment property.

Conventional financing is generally going to cap you around 75% LTV on the purchase.

Meaning:

25% down.

On a $500K property, that’s $125,000 just for the down payment.

Now compare that to certain Non-QM/DSCR programs that can go as high as 85% LTV on a purchase.

That’s:

15% down

$75,000 instead of $125,000.

You just kept $50,000 in your bank account.

And these DSCR programs can do that without monthly mortgage insurance.

Yes, the rate is probably going to be higher.

Yes, pricing at 85% LTV is usually worse than pricing at 75%.

There may also be a prepayment penalty depending on the program.

But now the real question becomes

Would you rather save .50%-.75% on the rate...

Or keep another $50K available for the next purchase?

That’s where I think investors need to look at financing differently than someone buying one house and staying there forever.

If putting 25% down gets you the prettier loan but eats up all your buying power, I’m not automatically convinced it’s the better deal.

Especially if 15% down lets you buy another property six months later.

There’s no trophy for having the lowest rate.

The question is what structure helps you build the portfolio you actually want.

Would you take the higher rate to keep another $50K liquid?