Expected downpayment for multiunit investor mortgage?

Question

Hi BP family!

I am trying to buy a duplex in the southside of Chicago (Woodlawn). I always thought an investor mortgage was 20% down, but the lender from Perl mortgage said it is 25% down for a multiunit.

Does anyone have tips for finding the best investor mortgage in Chicago?

Thanks in advance,

Meera

Dhru Das · Answer

@Cody Parker as far as I know, FHA loan has to be signed by primary homeowner only and not LLC or partnerships....but may be a lender can confirm this...You will have to live there for one year and yes, moving out after one year is fine.

Cody Parker · Answer

At the risk of sounding like the rookie that I am...Is it possible to have a partner and purchase the property thru an LLC and still use an FHA loan as long as one of you lives in it? Additionally what if the property is originally purchased as an FHA and you move out a year later? Myself and a friend are looking at a 4 plex and he wants to move in whereas my situation would stay the same (neither of us own our residence). I'm new to this and am also trying to find ways around the 25% rule for investment property...

Ham Merritt · Answer

@Dhru Das @Meera Lakhavani @Stefanie K. It depends on the lender. If you find a direct endorsed Fannie and Freddie mortgage banker with minimal overlays, the minimum would be 15% for s SFR. Anything more than a 2 family would be 25%.

Dhru Das · Answer

@Harjeet Bhatti I thought investors properties are always 25% down for anything over a SFR...I would definitely be interested on 15% down investor properties..

@Meera Lakhavani as @Stefanie Kwasiborski suggested if you are just starting investing then moving in to the property will be great as you can purchase via different options like FHA/FHA203K/homestyle/5% down 1st time buyer etc...all with very low down payment..

Alex Bok · Answer

@Meera Lakhavani I have a few good lenders i can refer you to especially in the south side where i do lots of work. 25% is fairly common though so it may be hard to get past this

Harjeet Bhatti · Answer

15% is minimum requirement for duplex but you will pay MI.

Stefanie K. · Answer

If you don't own other real estate, make it your primary residence.  You will receive far more favorable terms.  If you need a recommendation for a lender, I can provide someone I have worked with locally who has been great.  If you are new to this, it helps to have a lender who will take the time to explain and teach you these things (not sure how Perl has done, I don't have experience with them).

Bob Rowe · Answer

For a SFR, the minimum is 20%...  I am sure you can research a few other options to get you to your goal of the 80% LTV.   However, the rate will be affected.   The higher the LTV, the higher the risk = higher the interest rate.   If you cannot find a single source, some lenders may give you a HELOC behind the 75% 1st to get you to where you need to be.

Good luck!

Chris Mason · Answer

SFR investment can actually be as low as 15% down with a traditional mortgage.

2-4 unit investment properties require 25% down starting off, 30% down once you're past 6 financed properties.

Those numbers change every year or two.