I met with a lender today and they said they suggest we put down 25% down instead of 20% because at 20 the cost is much higher.
" you’ll want to put 25% down if you can. You can be approved for financing with only 20% down (pending the style of property), but there is quite a significant increase in pricing between lending 75% and 80% of the value"
Is this typical?
@Michael McManus thats not true. Check with other lenders. That may just be that particulars banks policy. 20% or 25% is the typically investor down payment. The terms and interest rates will differ with each lender. Shop around.
They are correct in stating that it will improve your rate and pricing. google loan level pricing adjustments. It's fannie mae's chart on the discounts given on a rate determined by credit, property type, occupation type, loan amount, and down payment.
key word in your situation is " if you can." if you are getting seller concessions or can afford to put 25% and you wont be left bone dry in the bank at the end of the day, then why not. But that is not every ones situation so go with what is comfortable for you and what you can live with at the end of the day.
Let me know if you have any more questions or concerns.
@Michael McManus I'd try to see if the lender can tell you what interest rate you'd get comparatively with 20% down vs 25%. If the difference is only a couple bucks of interest a month, then save the 5% for another investment down the road.
LTV certainly is one of the factors to your interest rate, but the difference between 20% and 25% should be nominal. Shouldn't really even be 1/8 lower.
everyone is assuming this is your primary Home. I would assume that as well. Michael is right on the money when he explains the rate. However, on an investment property, 25% is a BIG DIFFERENCE. Need all the details before making a judgment call. I learned in my 27 years of doing this NEVER ASSUME
Thank you everybody! I appreciate your feedback and will get more details from the lenders we're speaking with!