Lower Down Payment Investor Mortgages

6 Replies

I am in the process of closing the first deal using conventional financing. In the meantime, I have been looking at other properties for deal #2. I have identified a few good possibilities, however cash will be tight as I plan on making improvements in Deal #1. I know that there have been a number of threads on 0% money down mortgages for investment properties, which is not possible at all at this time. Therefore, I wanted to see if there are 10-15% down mortgage products out there for investors?

Besides searching on BP, I have asked a few portfolio lenders in MA, who are requesting more investing experience before they will discuss possibilities. So I was hoping to see if there is anyone who has had any luck/experience with lenders in Southern New England (CT/MA/RI)? I’d like any pointers on a lower down payment mortgage product, as I’d like to set aside some cash for vacancies, repairs, and 6 months of cash reserves.

Any advice would be most appreciated.

Good luck finding those @Jahan Habib - to my knowledge, besides hard money, it's very difficult to find a commercial or investment property with a penny less than 75% LTV, 80% LTC or 1.2 DSCR.

Let us know what you find out... 

@Flavio Zanetti I appreciate your response and I recognize the challenge in finding financing that will require a lower down payment. I think it’s worth a shot to try to find a lender who understands my perspective: I’d rather spend the dollars on making cosmetic updates, having cash on hand as reserves etc.

Originally posted by @Jahan Habib :

find a lender who understands my perspective

The lender does not have to look at it from your perspective. You have to look at it from the lender's perspective. They will have plenty of business at lower LTV so why should they take a higher risk with you?

Originally posted by @Neil Aggarwal :
Originally posted by @Jahan Habib:

find a lender who understands my perspective

The lender does not have to look at it from your perspective. You have to look at it from the lender's perspective. They will have plenty of business at lower LTV so why should they take a higher risk with you?

Actually the risk is higher if the borrower does not have funds for maintenance, cash reserves etc. because they have spent their dollars on the down payment/transaction costs. However I understand your point and recognize that it will be an uphill battle.

@Jahan Habib Actually, it's riskier for the lender if the borrower has $0 or nearly $0 vs. 20% into the deal, as it becomes a lot easier for someone to walk away from something when they don't have any 'skin' in the game.  Also, keep in mind that the lender is looking at a debt return, not an equity return.

The lender is going to play the odds and allocate its capital to someone with 'skin' in the game, who will have a vested incentive to have a successful project, and hopefully has previous, successful experience - as @Neil Aggarwal notes in his reply.

Best of luck finding the $0 down financing and you're spot on that you won't know absolutely unless you inquire.  Assuredly, you'll never get a 'yes' response, if you don't ask.  Just be prepared for an uphill challenge.

@Scott VanHee I appreciate the response. Actually Scott I was referring to a 10-15% down payment rather than 0% down payment in my first message. Therefore, there is 'skin in the game' for the lender. The only difference is that I would have sufficient reserves in the bank with the 15% down payment.

I think that the bigger risk for the lender is the increasing values in the Boston metro area -- bubble 2.0, anyone?

In any case, this point is moot, as I have found a lender who is willing to work with me and understands my perspective. Now the hard part is finding that special second deal :)

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