typical down payment for a mortgage on an investment property

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typical down payment for a mortgage on an investment property

Joe Fermin
New to Real Estate · Las Vegas, NV · Member since 2023 · 62 posts · 16 votes

evening all.  went to speak to a local bank today regarding a potential mortgage on an investment property.  we have our primary home and an occupied rental.  they said that the minimum down payment for another home would be at least 30%.  is that about the typical size of down payment on an investment home?  thanks for any info

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David Bilandzija
Lender · Venice, CA · Member since 2021 · 189 posts · 132 votes
3y

Hey @Joe Fermin 90% combined LTV is the best I'm aware of on long term rental loan program (30 yr fixed). The lender I've worked with in these scenarios will offer 75% max LTV on a first trust deed mortgage and allow seller financing to make up the remainder (up to 90% CLTV).

There's no look at DSCR for qualifying the loan either. Good luck

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  • Eliott Elias
    Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
    3y

    Typical is 25%. Shoot for owner finance. 

    1Reply
  • Kathy Utiss
    Specialist · O'Fallon, MO · Member since 2010 · 148 posts · 46 votes
    3y

    A lot of people will tell you to attempt to do business locally. However, most banks and or lenders have so many hoops to jump thru. Even though you have a primary residence , and a rental does the debt to income or built in equity cover help the deal make sense? Credit score is a big factor as well. There are some companies offering jv equity partnerships that might help. However, my experience was not what was expected. You will have some chime in I'm sure. But the more info given the more precise your answers will be. 

    1Reply
  • Joe Fermin
    OP
    New to Real Estate · Las Vegas, NV · Member since 2023 · 62 posts · 16 votes
    3y

    thanks kathy and eliott.  this was the first convo i had with any sort of lender and wanted an idea of what was out there.  i did not really provide them with any financial specifics either so as i dig into it a bit more im sure ill have more questions.  thanks again

    0Reply
  • David Bilandzija
    Lender · Venice, CA · Member since 2021 · 189 posts · 132 votes
    3y

    Hey @Joe Fermin 90% combined LTV is the best I'm aware of on long term rental loan program (30 yr fixed). The lender I've worked with in these scenarios will offer 75% max LTV on a first trust deed mortgage and allow seller financing to make up the remainder (up to 90% CLTV).

    There's no look at DSCR for qualifying the loan either. Good luck

    2Reply
  • Joe Fermin
    OP
    New to Real Estate · Las Vegas, NV · Member since 2023 · 62 posts · 16 votes
    3y
    Quote from @David Bilandzija:

    Hey @Joe Fermin 90% combined LTV is the best I'm aware of on long term rental loan program (30 yr fixed). The lender I've worked with in these scenarios will offer 75% max LTV on a first trust deed mortgage and allow seller financing to make up the remainder (up to 90% CLTV).

    There's no look at DSCR for qualifying the loan either. Good luck

    thanks for the info david.  this is the first exposure for dscr for me so ill definitely do some more digging there.  i appreciate it
    0Reply
  • Joe Fermin
    OP
    New to Real Estate · Las Vegas, NV · Member since 2023 · 62 posts · 16 votes
    3y
    Quote from @Kathy Utiss:

    A lot of people will tell you to attempt to do business locally. However, most banks and or lenders have so many hoops to jump thru. Even though you have a primary residence , and a rental does the debt to income or built in equity cover help the deal make sense? Credit score is a big factor as well. There are some companies offering jv equity partnerships that might help. However, my experience was not what was expected. You will have some chime in I'm sure. But the more info given the more precise your answers will be. 

    thank you kathy
    0Reply
  • Joe Fermin
    OP
    New to Real Estate · Las Vegas, NV · Member since 2023 · 62 posts · 16 votes
    3y
    Quote from @Eliott Elias:

    Typical is 25%. Shoot for owner finance. 


     thank you eliott.  for owner finance, is that something you approach the owner with when making the offer?

    0Reply
  • Joe Fermin
    OP
    New to Real Estate · Las Vegas, NV · Member since 2023 · 62 posts · 16 votes
    3y
    Quote from @David Bilandzija:

    Hey @Joe Fermin 90% combined LTV is the best I'm aware of on long term rental loan program (30 yr fixed). The lender I've worked with in these scenarios will offer 75% max LTV on a first trust deed mortgage and allow seller financing to make up the remainder (up to 90% CLTV).

    There's no look at DSCR for qualifying the loan either. Good luck

    for a dscr, does the property have to have a current renter in it to prove income?  
    0Reply
  • David Bilandzija
    Lender · Venice, CA · Member since 2021 · 189 posts · 132 votes
    3y
    Quote from @Joe Fermin:
    Quote from @David Bilandzija:

    Hey @Joe Fermin 90% combined LTV is the best I'm aware of on long term rental loan program (30 yr fixed). The lender I've worked with in these scenarios will offer 75% max LTV on a first trust deed mortgage and allow seller financing to make up the remainder (up to 90% CLTV).

    There's no look at DSCR for qualifying the loan either. Good luck

    for a dscr, does the property have to have a current renter in it to prove income?  

    No. For the program i was referencing a current renter is not needed, property can be vacant.

    1Reply
  • Robin SimonBusiness Member
    Lender · Austin, TX · Member since 2022 · 5k+ posts · 4k+ votes
    3y
    Quote from @Joe Fermin:

    evening all.  went to speak to a local bank today regarding a potential mortgage on an investment property.  we have our primary home and an occupied rental.  they said that the minimum down payment for another home would be at least 30%.  is that about the typical size of down payment on an investment home?  thanks for any info


    DSCR Loans typical minimum is 20% (with 15% in some cases, but hard to cash flow in this rate environment at 15% down)

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    1Reply
  • Joe Fermin
    OP
    New to Real Estate · Las Vegas, NV · Member since 2023 · 62 posts · 16 votes
    3y
    Quote from @David Bilandzija:
    Quote from @Joe Fermin:
    Quote from @David Bilandzija:

    Hey @Joe Fermin 90% combined LTV is the best I'm aware of on long term rental loan program (30 yr fixed). The lender I've worked with in these scenarios will offer 75% max LTV on a first trust deed mortgage and allow seller financing to make up the remainder (up to 90% CLTV).

    There's no look at DSCR for qualifying the loan either. Good luck

    for a dscr, does the property have to have a current renter in it to prove income?  

    No. For the program i was referencing a current renter is not needed, property can be vacant.


     thank you

    0Reply
  • Joe Fermin
    OP
    New to Real Estate · Las Vegas, NV · Member since 2023 · 62 posts · 16 votes
    3y
    Quote from @Robin Simon:
    Quote from @Joe Fermin:

    evening all.  went to speak to a local bank today regarding a potential mortgage on an investment property.  we have our primary home and an occupied rental.  they said that the minimum down payment for another home would be at least 30%.  is that about the typical size of down payment on an investment home?  thanks for any info


    DSCR Loans typical minimum is 20% (with 15% in some cases, but hard to cash flow in this rate environment at 15% down)


     thank you robin!

    0Reply
  • Jonathan R McLaughlin
    Rental Property Investor · Boston, Massachusetts (MA) · Member since 2016 · 2k+ posts · 2k+ votes
    3y

    banks are getting a bit skittish with their own loans. 25% is more usual but I could see 30% being needed for a small bank in this environment, especially if they are not all that active in real estate lending

    1Reply
  • Joe Fermin
    OP
    New to Real Estate · Las Vegas, NV · Member since 2023 · 62 posts · 16 votes
    3y

    thank you.  i plan on exploring a couple other ones here to see

    0Reply
  • Bud Gaffney
    Rental Property Investor · Boston, MA · Member since 2019 · 2k+ posts · 1k+ votes
    3y

    @Joe Fermin 20-25%. Owner house or house hack?

    1Reply
  • Ryan ThomsonBusiness Member
    Real Estate Agent · Colorado Springs, CO · Member since 2018 · 1k+ posts · 1k+ votes
    3y

    @Joe Fermin I gotta imagine you can find something for 20-25% for an investment property. If you intend to move into this home and make it your primary you should be able to line up a 5% down loan. 

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    1Reply
  • Eric Yu
    Real Estate Agent · Seattle, WA · Member since 2019 · 243 posts · 246 votes
    3y
    Quote from @Joe Fermin:

    evening all.  went to speak to a local bank today regarding a potential mortgage on an investment property.  we have our primary home and an occupied rental.  they said that the minimum down payment for another home would be at least 30%.  is that about the typical size of down payment on an investment home?  thanks for any info


     Where are you trying to purchase a property? There's some lenders / credit unions who can do 10% down investment loans as well. Rare to find a program like that, but I have a lender who can do that in the PNW. 

    1Reply
  • Erik EstradaBusiness Member
    Lender · Member since 2022 · 6k+ posts · 1k+ votes
    3y
    Quote from @Joe Fermin:

    evening all.  went to speak to a local bank today regarding a potential mortgage on an investment property.  we have our primary home and an occupied rental.  they said that the minimum down payment for another home would be at least 30%.  is that about the typical size of down payment on an investment home?  thanks for any info


     20% down is typical in this environment. Although some are pushing for 25%. It really depends on the property debt servicing with a higher loan amount. 

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  • Christian BachelderBusiness Member
    Real Estate Broker · Marina del Rey, CA · Member since 2018 · 105 posts · 25 votes
    3y

    Minimum conventionally speaking is 15% from a Fannie or Freddie backed loan product. Many banks have overlays. A broker could regularly offer 15-20% down but in this environment, 15% doesn't make sense. I'd say speak to a broker until you find one that offers 20%. Thats where we normally end up on most our products.

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  • Ned CareyPro Member
    Moderator
    Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
    3y

    as you can see loans can vary tremendously. Typically 25% down is common. But it can range from 15-30%. It can vary quite a bit from lender to lender and particularly from one type of lender to another, ie; credit union, local bank, national bank, hard money, DSCR etc.

    Financing is tightening up so expect interest rates and terms to get tougher. It pays to build relationships and shop around 

    0Reply
  • Zane Cress
    Realtor · Athens, GA · Member since 2023 · 201 posts · 104 votes
    3y

    My local bank is still quoting me 20% down as of last week. My national lending agent is quoting me 25% down. For a rental property you might have better luck with a DSCR loan right now, but still probably 20% down there, you could get lucky with 15% down if the deal is really good.

    1Reply
  • Andrew Carlson
    Rental Property Investor · Rochester, MN · Member since 2017 · 224 posts · 323 votes
    3y

    @Joe Fermin

    Hey Joe,

    I used a local bank and was able to put 10% down and collateralize my personal home for 2 years to get up to that 20%ish down payment. So maybe try to use your personal home or current rental property as collateral?

    1Reply
  • Joe Fermin
    OP
    New to Real Estate · Las Vegas, NV · Member since 2023 · 62 posts · 16 votes
    3y
    Quote from @Bud Gaffney:

    @Joe Fermin 20-25%. Owner house or house hack?


     this would be for owner house

    0Reply
  • Joe Fermin
    OP
    New to Real Estate · Las Vegas, NV · Member since 2023 · 62 posts · 16 votes
    3y
    Quote from @Andrew Carlson:

    @Joe Fermin

    Hey Joe,

    I used a local bank and was able to put 10% down and collateralize my personal home for 2 years to get up to that 20%ish down payment. So maybe try to use your personal home or current rental property as collateral?


     thank you.  that was something they did mention being an option as well.  may end up going that route

    0Reply
  • Joe Fermin
    OP
    New to Real Estate · Las Vegas, NV · Member since 2023 · 62 posts · 16 votes
    3y
    Quote from @Zane Cress:

    My local bank is still quoting me 20% down as of last week. My national lending agent is quoting me 25% down. For a rental property you might have better luck with a DSCR loan right now, but still probably 20% down there, you could get lucky with 15% down if the deal is really good.


     this is very helpful info.  thank you

    0Reply
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