If you’re seriously considering becoming a real estate investor and are ready to throw the switch and buy your first rental, you have a couple of basic options: pay cash or finance the purchase. And while you can certainly pay cash for real estate any financial or tax advisor will tell you it’s better tolender overlays leverage your position and borrow the funds, especially with long term mortgage rates being as low as they are.

However, while your financing options are good ones there are really aren’t that many of them. In fact, there are really only two types of financing, those underwritten to Fannie Mae guidelines and those by Freddie Mac.

Mortgage companies will typically offer one or the other but will have access to either and all lenders use the same basic suite of loan approval requirements. If you can get approved at one lender you can get approved at another. And on the opposite side, if you get declined at one lender you can get declined at another mortgage company. Maybe. Or maybe you just ran into a lender who has an internal requirement that makes it tougher to qualify.

Such additional guidelines are called “overlays” and are attempt to enhance a lender’s overall loan quality. Over time, when lenders continually provide quality loans in the secondary market, those lenders may have access to cheaper lines of credit used to fund loans before they are sold. And it’s perfectly legal for lenders to add more guidelines as long as the guidelines don’t discriminate against protected classes.

For example, a lender might require a 25 percent down payment if your credit score is 640 but a borrower can only come up with 20 percent. The borrower couldn’t obtain an approval and pulled back to reapply when another 5 percent was saved, not knowing the additional 5 percent was a lender overlay and another mortgage company could have approved the loan with the minimum 20 percent down payment. These loan programs are almost identical from lender to lender but sometimes there are minor differences. If you don’t get the loan approval you want, you might succeed with a different mortgage company.