5 Ways to Finance a Rental Property That Nobody Talks About
Episode
34 min
Read time
2 min
Topics
Personal Finance, Relationships, Investing
AI-Generated Summary
Key Takeaways
- ✓NACA Loans: Neighborhood Assistance Corporation of America offers 4.75-5.25% interest rates with zero down payment, no closing costs, and no PMI for lower-to-moderate income buyers. Qualification requires attending workshops and extensive paperwork over six to twelve months. Buyers can purchase up to four-unit multifamily properties, with rental income from other units counted toward qualification. Must refinance if moving out since it requires owner occupancy.
- ✓USDA Loans: US Department of Agriculture loans cover properties in 97% of US land mass designated as rural areas, often within 30-45 minutes of major cities. Borrowers earning 115% or less of median area income qualify for 100% financing at approximately 5.6% interest rates. Lower PMI than FHA loans, minimum 620-640 credit score required, and buyers can move out after twelve months while keeping the loan intact.
- ✓Seller Financing: Negotiate directly with sellers who own properties free and clear, eliminating bank involvement entirely. Target sellers with 100% equity using MLS filters or county records. Structure deals by identifying seller priorities—if they need $300,000 price and $1,500 monthly payment, adjust down payment, interest rate, and loan term accordingly. Works for non-owner occupied properties, enabling unlimited portfolio growth without traditional mortgage constraints.
- ✓Assumable Mortgages: Take over existing FHA, VA, or USDA loans with 2-4% interest rates from COVID era when purchasing properties. Buyer must pay seller the difference between remaining loan balance and current market value, either in cash or through secondary financing. Blended rate typically beats conventional mortgages even with second loan. Requires owner occupancy and finding sellers with these specific government-backed loan types through MLS filtering.
- ✓Non-QM Loans: Bank statement loans verify income through deposit history rather than W-2 forms, enabling entrepreneurs, real estate agents, and self-employed individuals to qualify. Expect interest rates 1-3% above prime, 10-25% down payment requirements, and faster approval than conventional mortgages. No PMI included, thirty-year amortization available, and some interest-only options exist. Widely available through local banks and smaller institutions serving non-traditional borrowers.
What It Covers
Henry Washington and Dave Meyer reveal five lesser-known financing strategies for rental properties in 2025, including NACA loans at 4.75-5.25% with zero down, USDA loans covering 97% of US land mass, seller financing for flexible terms, assumable mortgages from COVID-era rates, and non-QM loans for entrepreneurs using bank statements instead of W-2 income verification.
Key Questions Answered
- •NACA Loans: Neighborhood Assistance Corporation of America offers 4.75-5.25% interest rates with zero down payment, no closing costs, and no PMI for lower-to-moderate income buyers. Qualification requires attending workshops and extensive paperwork over six to twelve months. Buyers can purchase up to four-unit multifamily properties, with rental income from other units counted toward qualification. Must refinance if moving out since it requires owner occupancy.
- •USDA Loans: US Department of Agriculture loans cover properties in 97% of US land mass designated as rural areas, often within 30-45 minutes of major cities. Borrowers earning 115% or less of median area income qualify for 100% financing at approximately 5.6% interest rates. Lower PMI than FHA loans, minimum 620-640 credit score required, and buyers can move out after twelve months while keeping the loan intact.
- •Seller Financing: Negotiate directly with sellers who own properties free and clear, eliminating bank involvement entirely. Target sellers with 100% equity using MLS filters or county records. Structure deals by identifying seller priorities—if they need $300,000 price and $1,500 monthly payment, adjust down payment, interest rate, and loan term accordingly. Works for non-owner occupied properties, enabling unlimited portfolio growth without traditional mortgage constraints.
- •Assumable Mortgages: Take over existing FHA, VA, or USDA loans with 2-4% interest rates from COVID era when purchasing properties. Buyer must pay seller the difference between remaining loan balance and current market value, either in cash or through secondary financing. Blended rate typically beats conventional mortgages even with second loan. Requires owner occupancy and finding sellers with these specific government-backed loan types through MLS filtering.
- •Non-QM Loans: Bank statement loans verify income through deposit history rather than W-2 forms, enabling entrepreneurs, real estate agents, and self-employed individuals to qualify. Expect interest rates 1-3% above prime, 10-25% down payment requirements, and faster approval than conventional mortgages. No PMI included, thirty-year amortization available, and some interest-only options exist. Widely available through local banks and smaller institutions serving non-traditional borrowers.
Notable Moment
Meyer shares his frustration when leaving his W-2 job while earning six times his salary as an entrepreneur. His bank dismissed his entrepreneurial income entirely, only caring that his wife maintained traditional employment despite her earning a fraction of his new income, illustrating how conventional lending systematically disadvantages successful self-employed individuals regardless of actual earning power.
Episode Transcript
Financing real estate deals can be one of the biggest barriers to entry when investing. It's also one of the reasons investors stop scaling before they ever get to financial freedom. And you've probably already heard of all the big ones. We all know conventional loans, FHA loans, lines of credit. But what we're gonna share today are five loans you've probably never heard of. In fact, these have flown under the radar so well that we didn't even learn about them until we were years into real estate investing. We're talking about things like zero down payment loans with no closing costs, 5% interest rates and no credit check, or a loan you don't even need to go to a bank to get. If you've heard of all five of these, you're probably an expert investor. But if you're struggling to scale or you need a hand buying your first property, you cannot miss this episode. We're breaking down all five options so you can decide what makes the most sense for your financial situation. What's going on everybody? I am Henry Washington, co host of the Bigger Pockets podcast, and I've got my other co host Dave Meyer here with me. Today, we're talking about financing options you might not know about. This isn't FHA loans and HELOCs. We have five ways to finance deals that often go under the radar. So let's jump into the first one, NACA loans. I gotta be honest, man. I didn't know what this is when we were when we were when we were creating this show. And, honestly, there's, like, a whole chapter in one of my books where I just list out every kind of loan, and I didn't know about this one. This is, like, genuinely a cool under the radar, really awesome powerful type of loan that everyone should know about now that I know what it is. Absolutely. So I did know about this one, and it is a phenomenal loan option for people. So NACA loan stands for the Neighborhood Assistance Corporation of America, and it's a nonprofit. And they specialize in helping people who are either in underserved communities or who may not traditionally qualify in terms of credit score or financial situation to purchase a home. And this program provides them the opportunity to do that. Mhmm. And with this loan, you can typically get financed. You can get a lower interest rate, so lower than the prime rate, sometimes substantially lower than the prime interest rate. Yeah. The the rates for this right now are 4.75 to 5.25. 4.75 outside of COVID. That's the best mortgage rate you can get, basically. It's a cheat code with the terms because, yes, the interest rates are great, but you also don't have to bring a down payment and you don't have to pay the closing costs. It's It's unreal. Kind of insane. It's crazy because, like, there are other programs out there for lower income …
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“NACA Loans: Neighborhood Assistance Corporation of America offers 4.75-5.25% interest rates with zero down payment, no closing costs, and no PMI for lower-to-moderate income buyers.”
“USDA Loans: US Department of Agriculture loans cover properties in 97% of US land mass designated as rural areas, often within 30-45 minutes of major cities.”
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