Conventional Loan for Rental Property- Money Down- 20 vs 25% Down

[Spencer Herrick]

I've spoke to several lenders at this point and it seems that most will give you 30 years terms but every lender I've spoken with (3 different ones) are all requiring 25% down vs 20% down. Has anyone else seen this? Should I keep looking or is this just based on the economic climate we're in right now?

[Joe Marini]

Hi @Spencer Herrick,

For investments/ commercial loans, it is typical to see what you are seeing. If you wish to lessen the down payment, then you will want to make this a primary home loan [which may or may not work for you]. A hard money lender is also a great option, though your interest rate may be higher as the risk it higher. 

The reason why banks require a large downpayment is if the economy crashes they have the X% downpayment as a cushion. For more risky investments, they often require a larger downpayment. Lenders also take into consideration people's finances and experience in the field. Legal disclaimer: please seek professional advice from a licensed lender and attorney.

Best regards,

Joe Marini