Financing options for a 4plex

3 Replies

I was wondering if anyone had some information on different types of mortgage loans that are available with a lower down payment percentage than 25%.  I have heard of others putting down a lot less money but I wasn't sure how or what type of mortgage they used.  Also, I wasn't sure if it was specific to the bank they used.  I currently use BofA for everything and they told me that was basically my only option. 

You could try going FHA with 3.5% down and live in one of the 4 units. Otherwise buying outright you might find some local lenders that go 20% but interest rate is higher etc.

If you are looking for lower than that you have to find a bank willing to allow the seller to hold a 10 to 15% second for a combined LTV of 85% to 90% and you putting 10 to 15% down.

Another option is owner finance the whole thing with some down. 

As said above, I think one of the best options is to do an FHA loan and put down 3.5%, however you will have to live in one of the other 4 units.

Most lenders will actually now require upwards of 25% if you do not intend to live in any of the units and will also ask for upwards of 6 months reserves for not only that property, but also any other financed property. And while you don't have to keep those reserves in some sort of escrow account or anything, you still have to prove those to the lender throughout loan approval process.

It has become much more difficult for people to purchase investment properties using conventional financing over the past few years and although there is the "seller second" or "seller carry back" or "subordinate seller second" as it is sometimes referred, surprisingly few lenders will allow for it.

I'd suggest checking with a portfolio lender, that is to say, a lender who will not sell your loan to Fannie Mae, for instance. However, as they carry those loans on their books the interest rates charged are usually 100 to 150 basis points higher.

@Joel Owens and @Patrick Britton thank you both for your responses.  I wasn't planning on living in the units.  I just wasn't sure if a different bank was willing to take a lower down payment but your post have cleared it up for me that if its not owner occupied then a 25% is pretty standard across the board mostly.  Thanks for the help.

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