5 unit downpayment information

8 Replies

Hey I found myself very interested in a 5 unit.  I've never had a conversation with a commercial lender before and I can't call around until later today.  I know 2-4 units require 25% minimum, but what are the standards (if there are any) on commercial loan down payments?

It will likely depend more on the property's debt service coverage ratio than on an arbitrary percentage. 

PM me and I'll be happy to send you more details on calculating/analyzing the DSCR.

@Ryan Moore it is also depending on the occupancy or the property, which would reflect on the DCR as Jeff mentioned above.

I would underwrite on 30% down, but aim to get it at 25% max. 

Note: the Amortization can be shorten if the property agent is older, some banks will go out to 25-30y Amort if the property is 1980s or younger.

and will only go 15-20Y Amort if older then 1970s

@Ryan Moore wrote, "I know 2-4 units require 25% minimum."

Actually $0 down is the minimum for VA loans. FHA loans require 3.5% down on up to 4 units. Conventional loans require as low as 5% down depending on your credit score and other factors. Unless you have a specific strategy, there's no reason to put down 25% on a 2-4 unit property.

Originally posted by @Ray Harrell :

@Ryan Moore wrote, "I know 2-4 units require 25% minimum."

Actually $0 down is the minimum for VA loans. FHA loans require 3.5% down on up to 4 units. Conventional loans require as low as 5% down depending on your credit score and other factors. Unless you have a specific strategy, there's no reason to put down 25% on a 2-4 unit property.

The VA is only available to veterans and both are only available to owner occupants. Also getting more than one of these loans at a time is difficult with few exceptions.

Your advice does not make sense to someone who like me already has an FHA loan, is not a veterean, and has no desire to owner occupy. Minimum 25% down on 2-4 units is pretty standard. Many lenders also will require 25% down on 2-4 unit owner occupied properties if you currently owner occupy a single family home.

Just a heads up.

Before you talk to lenders, I would boost FICO to 800 and season a LLC with as much business credit as possible. Some good resources are CreditBoards, CreditKarma and Nav.