Is it ever a good idea to put less than 20% down if you have excellent credit and just enough funds to do so? I know mortgage payments would be a bit higher and MIP would be added, but if I put 10% down and invested the other 10% in an index fund would that be better or worse than putting the whole 20% down?
Definitely. In fact, I think it makes more sense for most people to put less than 20% down because of the opportunity costs involved. Like you said, if you can invest the money and get a greater return than your cost of borrowing, which is extremely low right now, logically you SHOULD put your money to work in the vehicle that provides a greater return.
By putting less money down, you are keeping more of your funds liquid which can be easily accessed. That way you have adequate reserves for capex or other expenses that come up when investing in real estate. One of the major cons of real estate is that it is illiquid, meaning that your funds or equity is not readily accessible and transactions take a long time to occur when compared to other investment vehicles. If you needed to capture your equity trapped in your property you typically need to wait at least 30 days to sell. There's also the argument to be made about using less of your own money (aka using more leverage) in order to magnify your investment returns.
You can still tap into your home equity using home equity loans and HELOCs of course, but those borrowing rates tend to be higher.
Is lenders giving out 10% loan for investors? Since Covid I am seeing a minimum of 20% down. If you can though I'd put down less. The bad part of less than 20% is having pesky PMI to add onto your monthly payment.
Thanks @Paul De Luca ! @Caleb Brown This would be for an initial house hacking opportunity so I'd assume <20% for a primary/residential mortgage would be attainable (although assuming the additional PMI). I'm trying to find the sweet spot between the lowest down payment (higher mortgage/longer PMI) and higher down payment resulting in less time paying PMI.
Well on the case of house hacking do FHA 3.5% down on a fourplex.
What @Caleb Brown said. I would just build the PMI into your numbers. It's the cost of doing business when you put down less than 20% but you have the best opportunity to cashflow while house hacking a fourplex. Fourplexes tend to more easily pass the FHA self-sufficiency test compared to triplexes too.