Bad info from lender, deal about to fall apart

7 Replies

Hi all,

My lender told me a while back that he had a loan program available for 2-4 unit properties that required 20% down.  Based on that, my wife and I have spent a great deal of time researching properties, going out on showings, etc.  We finally found a promising duplex, and wrote an offer that was accepted (my lender wrote up the pre-qual letter, even).

The same evening that the offer was accepted, in response to a question of mine, my lender emailed me and said he was very sorry but he had been mistaken about the 20% down loan program, and that the only products he had available all require a minimum of 25% down.  What?!  There go dozens of hours of our time, our realtors time, etc. researching investments.  Talk about upsetting, ugh.

Anyway, I'm scrambling around this morning doing research and making calls to see if I can track down any lenders that will do 20% down (and in an ideal world, less) on a 2-unit investment property.  We have the 20% funds ready to go, good/excellent credit in place, was the extra 5% on the 25% that's a deal breaker, both because we don't have the extra liquidity right now, and because the property just doesn't pencil w/ that much of a down payment.

Thanks in advance,


I don't know of any. For those small properties 25% is pretty standard.

Your lender did what it sounds like in our business is called a "re-trade". They tell you one thing with great terms and then switch it up on you to something else.

This is why on large commercial deals ( 5 ,10,15 million etc.) I have lenders I trust that when they quote a rate it will be locked and funded at that rate. Now having said that there are times where a package is presented and numbers as one thing and then under due diligence the buyer finds that the sellers numbers and occupancy are different than reported. In that case the lender has every right to ask for more down because the numbers have changed presenting more risk.

So some things are in a lenders control and others are not.

Have you gone to the place you bank already?? They might have a portfolio loan in house and give you 20% down because they can connect up your other accounts as security to accept the risk. 

Thanks for the quick reply Joel.  That's interesting information, and somewhat confirms what I'm now suspecting that generally speaking 25% is going to be our only option.  I will certainly get in touch with my bank (Wells Fargo) though, that's a great idea.

Hi @Reid Simonton  . I've only seen 25% percent lately. Self check though: If the 5% extra isn't doable, are you sure that you are in the financial position to afford this investment? You should have 6 or so months of a safety net to operated the property without any rent coming in.

Best of luck!

Hello Reid,

If this was a primary residence then you could put down as little as 15% on a 2 unit property.  Unfortunately you're looking at 25% down for both Fannie and Freddie.

You need to have your realtor look over the contract because you don't want to lose your EMD ( Earnest Money Deposit ) because of all of this.

Thanks for the comment @Mark Bookhagen  .  This isn't an affordability issue though, as mentioned the numbers just don't work at 25% down.  And on top of that, our liquid funds are tied up in other things at the moment.  FWIW, this isn't our first investment property...just our first MF.  :)

@Shaun Weekes yeah, this wasn't going to be an owner-occupied scenario. Thanks for the comment on EMD, we actually haven't even handed that over yet, and our realtor tells us we're still ok to back out if we want to...though time is running out quickly.

Are we trying to be creative??  Credit card advance, loan from 401k, retirement, parents, friend, cousin, old neighbors, someone, anyone.  You should be able to find someone to lend you the 5% and you give them a 2nd on the property. 

If you are part of a REIA in your area, someone might be willing to do the same. If its a great deal, dont walk away because you need a little more down payment.

Originally posted by @Reid Simonton :

This isn't an affordability issue though, as mentioned the numbers just don't work at 25% down.  

 If the numbers don't work, keep looking until you find a deal that the numbers do work.  Real estate investing is simple, but it isn't easy.  If the numbers are that tight, then it might only be a good deal, not a great deal.  You will go much farther, much faster by focusing only on great deals.  You will have to turn over a lot more stones to find them, but you will be glad you did.

For a great deal, it is possible to find the money.  For any deal, it is impossible to find more time.  Time is the only thing that you can't buy or borrow.  Don't waste your time on mediocre deals.

This isn't intended to be discouraging in any way.  I wish I had a dollar for every NO I heard trying to find money to finance a deal.  I would never need to borrow money again!  I started out with no money to put down because that is all I had.  I figured it out and became very good at putting together creative ways to finance deals after I found really good and/or great deals.

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