5% down or wait for close to 20% down on first property

9 Replies

Hey all your smart people you.

Question on best ideas for my down payment on a mortgage. I am researching to get my first property. I qualify for 5% down and I almost have enough money to do that. Here is the dilemma. I understand if I wait until I have 20% down for a property I will avoid PMI, lower my mortgage payments, etc. I also understand if I get a property at 5% down I can lower my living expenses (no more rent since I'll move into the property and I will have renters in rooms to spread out the cost of the mortgage), get into a property that much faster, and get started on my dream of getting into buy and hold properties.

My question is, what in your experience would be the more beneficial idea: buy my property really soon at 5% or wait until I can pretty much pay the 20% down?

I have never purchased a property with a required down payment.  I have always had access to funds at 100% of the purchase price including repairs.  Who is your lender?

Originally posted by @Rob Caldwell :

I have never purchased a property with a required down payment.  I have always had access to funds at 100% of the purchase price including repairs.  Who is your lender?

Sorry, I wasn't explicit in my lending method. This will be my first property ever and I'm just going to go through a local, owner occupied bank mortgage provider that requires at least 5% cash down payment if you have the right credit. This would be for a rental property that I would live in for about a year where I'm renting out the rooms as well.

This is one of those highly debatable questions. I personally like to put as little down as possible. Than my tenants are paying off my mortgage and I am not having to do a refinance. 

Originally posted by @James Wise :

Buy with 5% down.

Conventional resi bank financing is the cheapest money around. I would use as much of it as possible.

 No doubt, I love the interest rates I was pre-approved at. Thanks for the advice.

Originally posted by @Elizabeth Colegrove:

This is one of those highly debatable questions. I personally like to put as little down as possible. Than my tenants are paying off my mortgage and I am not having to do a refinance. 

 You do get into that whole idea of putting your money to use instead of just sitting in a bank account, waiting for it to hit 20%. Thanks!

I would go ahead at the 5% especially since you will getting help to pay the mortgage.

my advise is to go with the 20% route. with that being said, dont pull the trigger on buying a house until you have 25% saved.the extra 5% will come in handy for cosmetic upgrades that are inevitable and also for unexpected repairs/upgrades.

 I bought my first property this past summer and went with the 20% down payment which wiped out my whole savings. as luck would have it, my water heater broke down 2 weeks after purchasing the home and i had to borrow money from my brother. in addition, to paint the whole house, add blinds, new locks, new windows was a lot more then I planned for. Luckily my management company found tenants immediately after they put the house for rent so I made more then enough money to break even after a few months

5%, then put the other 15% towards the next property.

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