It is the point where a bank declines your mortgage or demands a higher down payment after you have purchased two or three properties, which happens because you have outgrown that specific lender's playbook of rules.
A-lenders apply strict debt ratios that often use only 50% of rental income while accounting for 100% of expenses, and they enforce internal portfolio caps that may limit lending to a maximum number of doors or total loan dollars per client.
B-lenders typically use 80% to 100% of rental income to qualify you and are more flexible with self-employed income, which increases your borrowing power once A-lender options are exhausted, though rates are usually about 1% higher.
Yes, specific commercial lenders will finance one-to-four-unit residential properties—including single-family homes and fourplexes—by qualifying based on the property's net operating income rather than your personal borrowing capacity.
Private money should only be used as an absolute last resort after maximizing A-lenders, B-lenders, and commercial options; if your property is in good condition and you are being quoted private financing, it often means your broker has not exhausted all other avenues.
