How do I find mortgages that allow only 5% down

4 Replies

So I am wondering if I could ever buy this 6 unit multi family building that has a list price of $899,000 with a 5% down mortgage.

By the time I save enough for the 5% my Fico score should be 750+

Most wont allow it for investment homes. Are you planning on living in one of the units?

Originally posted by @Christine Kankowski :

Most wont allow it for investment homes. Are you planning on living in one of the units?

 Yes

Hi @Jun Zao - When it comes to dealing with residential versus commercial mortgages there's a few key differences.

1) Some residential mortgage programs allow for different criteria based on owner occupancy. If you live in one of the units of a fourplex, you can qualify for financing as low as 5% down with a traditional program or 3.5% with an FHA loan. With commercial mortgages, the bank does not allow special programs for owner-occupancy. In fact, most commercial lenders will be less likely to lend to you if you intend on occupying one of the units because it will require you to decrease the cash flow the building provides as an investment (5 units paying rent versus 6 units).

2)  Commercial loans are typically 25% down if it meets all of the criteria typically established by the lender.  Rarely do I see even 20% down loans, and usually they go 30%+ if the property doesn't meet certain cash flow requirements.  

3)  FICO scores typically aren't a huge factor when it comes to obtaining commercial financing.  Residential loans typically qualify the borrower first and the property second.  Commercial loans typically qualify the property first and the borrower second (assuming you have the required cash for a downpayment).  

So in short, the answer is no.  If you're looking to owner-occupy a property to achieve a lower downpayment, you need to stick to residential properties (4 units or less).

Matt Lefebvre, Real Estate Agent in NH (#070207)
603-554-2309
Originally posted by @Matt Lefebvre :

Hi @Jun Zao - When it comes to dealing with residential versus commercial mortgages there's a few key differences.

1) Some residential mortgage programs allow for different criteria based on owner occupancy. If you live in one of the units of a fourplex, you can qualify for financing as low as 5% down with a traditional program or 3.5% with an FHA loan. With commercial mortgages, the bank does not allow special programs for owner-occupancy. In fact, most commercial lenders will be less likely to lend to you if you intend on occupying one of the units because it will require you to decrease the cash flow the building provides as an investment (5 units paying rent versus 6 units).

2)  Commercial loans are typically 25% down if it meets all of the criteria typically established by the lender.  Rarely do I see even 20% down loans, and usually they go 30%+ if the property doesn't meet certain cash flow requirements.  

3)  FICO scores typically aren't a huge factor when it comes to obtaining commercial financing.  Residential loans typically qualify the borrower first and the property second.  Commercial loans typically qualify the property first and the borrower second (assuming you have the required cash for a downpayment).  

So in short, the answer is no.  If you're looking to owner-occupy a property to achieve a lower downpayment, you need to stick to residential properties (4 units or less).

I see, thanks.

I knew the 3.5% FHA has a 4-unit limit for owner occupancy. I thought that the 5% would allow for more units for owner occupancy. Oh well.

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