Conventional Loan – is the most well-known type of loan out there. This is the kind that you would see when buying primary residences.

Pros
 Follows guidelines outlined by Fannie Mae and Freddie Mac
You can put as little as 3% down with PMI
Lower fees and interest rates

Cons
Strict qualifications: you need low debt to income ratio & credit score of 620 or more
Have to put 20% minimum or else there is PMI

Why you might want to use
It’s most suitable if you have a stable income, strong credit, enough to put 3% down and have low debt to income ratio

How to get it?
Loan brokers, banks, or mortgage companies

Seller’s Financing – is an option where you involve the seller directly to finance the deal.

Pros
Terms are negotiated on a case by case basis
Little to no qualifications needed
Can be used as secondary debt if primary debt allows
Do not need a bank (less fees and paperwork)Typically faster closing process

Cons
Seller must be willing to finance and this can be difficult to find
May have higher interest rates than a conventional loan

Why you might want to use
If you do not qualify for a conventional loan or do not want to use banks or institutions

How to get it?
You would have to negotiate with the seller

Bridge Loan – is generally a short-term loan meant for improvements and is usually refinanced into conventional loan before the term ends.

Pros
Usually easier to qualify for than conventional loan
Can get financing for improvements
Can get lower interest rates than a hard money loan
Considers the future potential of the asset (debt to income of when asset is stabilized)

Cons
Much higher interest rates and fees than a conventional loan
Generally will need at least 20% loan down on the project cost (purchase price + improvements)

Why you might want to use it?
If you are looking to make property improvements with the intention of a quick turn around time to stabilize the asset

How to get it?
Private or conventional lenders

 Hard Money Loan – is a short term private loan with generally very high interest rates.

Pros
Very easy to qualify for
Quick underwriting and qualifications
Generally can get a loan on both down payment and/or construction costs
Can get up to 100% financing from some lenders

Cons
Very high interest rates

Why you might want to use?
If you need capital quickly and you do not qualify for other loans

How to get it?
Private lenders