Posted by Hannah Lapin ● Jun 24, 2020 9:00:00 AM

Four Kinds of SFR Loan Programs

4 Loan Program Categories

When it comes to financing a single-family home, there are essentially two giant buckets: government sponsored loans and private label loans. These can further be broken down into consumer/owner occupier loans and business purpose/investor loans. Let’s dive into each of these four categories to gain a deeper understanding.

  1. Government Sponsored Business Purpose Loans

    This bucket of loans is less expensive, yet more restrictive. They can be very hard to qualify for, especially for self-employed investors with multiple rental properties.
    • Conforming Investment Property Loans: Conforming loans are loans that meet the criteria established by Fannie Mae and Freddie Mac. They come with strict qualifications such as a maximum Debt-to-Income Ratio of 45% with 12 months of financial reserves and a maximum Debt-to-Income Ratio of 36% with six months of financial reserves.
  2. Government Sponsored Consumer Purpose Loans

    This bucket of loans is also less expensive and meets the criteria established by Fannie and Freddie. These loans are targeted at owner-occupiers and often first-time home buyers. Here are some special loan programs under this branch:
    • FHA Loans: These loans are designed for low-income borrowers and require low down payments and credit scores.
    • VA Loans: These loans are designed to help veterans become homeowners and are back by the U.S. Department of Veterans Affairs.
    • USDA Loans: These loans are designed to promote rural development and are backed by the U.S. Department of Agriculture.
  3. Private Label Business Purpose Loans:

    This bucket of loans tends to be more expensive, yet flexible and can help investors grow their businesses. Here are some of the loan programs that fall under this category.
    • Investor Rental Loans: These loans are tailored to meet investment strategy needs and often offer low documentation and no income verification, like Visio's Rental360 Loan Program.
    • Investor Renovation Loans: These are short-term loans for investors to purchase and rehab non-owner-occupied properties.
  4. Private Label Consumer Purpose Loans

    This bucket of loans is designed for consumers who do not meet the criteria set forth by Fannie and Freddie. These typically include jumbo loans and non-QM loans.
    • Jumbo Loans: These loans exceed the limit established by Fannie and Freddie, which is $510,400 as of 2020.
    • Non-QM Loans: Examples of non-QM loans include bank statement loans for self-employed individuals and foreign national loan programs.

Learn more about investor financing options, and be sure to check out our Investor Resources.

More Resources

 Related: Should you conform? Expand Your Wealth With a Cash-Out Refinance

Topics: Real Estate Investing, Finance