You are thinking of buying a rental home? Are you looking for information about the different types of rentals loans?

Knowing the different financing options is important if you are looking to rent a property. If you’re looking to purchase a rental property, there are many financing options available.

This guide will tell you all about the most common types of rental loans currently available.

1. Conventional Loans

Conventional loans for rental properties are very popular and are an option to fund a rental house.

The interest rates on these loans will be lower than many of other available options. You will need to be able to show proof of your credit, and also make a downpayment on the property.

Conventional rental loans are offered by traditional lenders, such as credit unions and banks. Mortgage brokers can also provide these loans.

2. FHA Loans

If you are looking to purchase a rental property, another option is to apply for a Federal Housing Administration loan.

FHA loans offer many advantages. However, there are important things that you should keep in mind. FHA loans require that you meet certain credit requirements and make a downpayment. Both of these requirements will usually be lower than traditional loan requirements. You may also be eligible for these loans if you have rental income.

FHA loans are especially helpful to multifamily property owners who plan on staying at the property for at most one year.

3. VA Loans

An Veterans Affairs loan (VA) is available another optionFor the purchase of rental property. You can purchase a multifamily property with these loans, but you’ll need to make one of the units your primary residence.

Traditional lenders can offer these mortgages, which are guaranteed by the U.S. Department of Veterans Affairs. Eligible spouses and active-duty personnel can be eligible for these loans. These loans don’t have a minimum downpayment or credit score requirements. 

4. Blanket Loans

A blanket loan is another option that investors have to consider if they want to purchase more than one rental property.

You can finance multiple rental properties with one loan by using a blanket loan. The rates of these loans are subject to change so it is important to shop around for the best lender to match your needs.

These loans are often offered by private lenders and mortgage brokers.

5. Portfolio Loans

Somewhat similar to a blanket loan, a portfolio loan is a type of loan in which an investor will take out multiple individual mortgages for several different properties. An investor could get discounts on these loans if they are all with the same lender.

Based on each borrower and lender, there will be differences in the down payment, interest rate and credit requirements. This can still be an option if the investor owns multiple properties they want to finance.

6. Seller financing

A seller financing option is also an option for those looking to buy rental properties as investors. The seller can finance the property by acting as a lender in the event of seller financing. Although not all sellers will offer seller financing to investors, this can still be an option.

Although seller financing may have terms that are different from conventional loans, they will likely be comparable to traditional loans. Seller financing will require credit checks and a downpayment.

7. Private loans

If you are interested in becoming a landlord, private loans may be an option.

Private loans are where investors pool their funds to offer financing for potential renters. Private lenders have a lot of experience in real estate. They can adjust terms and fees based on specific details about the property.

Private lenders can also be an option if you need financing. Long-term financing for rental properties.

8. HELOCs and Home Equity Loans

A final option that you should consider for real estate investing is to get a home equity line of credit (HELOC) or a home equity loan.

These types of financing require you to borrow against the existing property. The HELOC is similar to a credit line, while the home equity loan works more like a second mortgage.

Either option can allow you to buy a new property, but you won’t be able to borrow the full value of your current property. The equity of your home will be restricted to 85 percent. This type of financing can also have high fees and rates.

The Different Types Of Rental Loans

You need to understand the various types of rentals loans if you are looking at buying a rental home. If you are looking for the best financing option to purchase a property, make sure that you consider each of these options. 

Are you looking for additional real estate information? To find out more about real estate, read our blog.