Is anybody finding 20% down financing any more?

17 Replies

Please note I am not asking to name names...just recent experience.

It used to be 20% down was common for investment property.  Is anyone finding 80% purchases these days?  Normal conventional.  Not at 12%....  Just wondering if I'm looking for a needle in a hay stack?

If I remember right SFH can be 20%, 1-2 units 25%... don't remember the rest. I just did a cash out refi on SFH and closed a duplex and that issue came up (had to bump up 5%).

 I just spoke with a lender yesterday that offered 15% for a 1 unit.

Maybe the issue is this is for a 2-unit.

@Russell Brazil You're talking about Freddie/Fannie requirements?  I have heard they are basically backing 90%+ of all mortgages today.  So that will be a problem.

I purchased a SFH rental with 15% down this year and also put down 20% on a duplex. Not unheard of but I should mention the SFH with 15% down purchase is a 30 yr fannie mae mortgage with interest rate 5.25 and the 20% down duplex purchase was through a portfolio lender who keeps loans in house--15/30 mortgage, no reserves for properties with them, no escrow, DSCR 1.3 or higher, the interest rate being near an owner occupied home rate. To refinance with this portfolio lender the rate is not higher than the going rate for a non refinance. They don't recognize refi's in that way if that makes sense. Hope this gives you a bit of an idea of what you're looking at. Every small local bank is different so make some calls. Fannie Mae is what it is but you'll be surprised if you call some banks who keep their loans in house.

I would take a look at smaller local banks. They often will negotiate some of the terms with you if you have a relationship with them. I purchased 12 units and got them to go 85% for 20 yrs, a little less that 5% interest. I just asked them to let me use the other 5% to replace all the windows in the units. They keep the loans in house, so they have more flexibility.
Good luck!

I got a Mortgage through BOA with 100% financing, no closing costs up front and you didn't need to have good credit either. I just needed to have a few thousand in the bank to verify and it takes a while to close but worth it I'm not saying this to impress you or to sell you something. I'm saying it to encourage you to keep on looking for the best deal.

The smaller local banks are where its at. Put on a suit, bring your paperwork and a smile and go for a drive. The small lenders in some areas tend to hold their loans in house so they are in it for the long run. Your may pay a half point higher, but you may be able to solve your down payment issue. I love local lenders. 

I'm currently under contract in Baltimore. 30 years @ 5.38, 20% down, 41K purchase price (REO).

@Tony Salemi we are missing details. How many properties do you currently have on conventional financing, including your own? 

There are firm rules surrounding convention (Freddie or Fannie backed) mortgages. Where you will find differences is if the local bank is holding the mortgage or a non-conventional type of loan. The Freddie and Fannie guidelines are always changing. They tightened up after the financial crisis and have been loosening up since then. As you add more properties, the down payment and cash reserve requirements will change. So when you say it used to be common for 20% down, it could just be the number of properties you have. I had to do 25% on my last few properties. 

Originally posted by @Roshard Jones :

I got a Mortgage through BOA with 100% financing, no closing costs up front and you didn't need to have good credit either. I just needed to have a few thousand in the bank to verify and it takes a while to close but worth it I'm not saying this to impress you or to sell you something. I'm saying it to encourage you to keep on looking for the best deal.

Was this owner occupied? The rules for owner occupied are very different than they are for investment properties. 

Originally posted by @Joe Splitrock :

@Tony Salemi we are missing details. How many properties do you currently have on conventional financing, including your own? 

There are firm rules surrounding convention (Freddie or Fannie backed) mortgages. Where you will find differences is if the local bank is holding the mortgage or a non-conventional type of loan. The Freddie and Fannie guidelines are always changing. They tightened up after the financial crisis and have been loosening up since then. As you add more properties, the down payment and cash reserve requirements will change. So when you say it used to be common for 20% down, it could just be the number of properties you have. I had to do 25% on my last few properties. 

 Sorry.  Details are:

I have only 1 property with conventional which is in fact my PR. Very good credit (740 middle). Plenty of reserve (more than 24 months). Low DTI (25%), property cash flows nicely (6.1 GRM) and 20% cap rate.

I'm starting to think there's a few things going on.  This will not be a local lender keeping the loan in house.  It is a 2 unit property.  Maybe I could spend a little more time searching out lenders as it seems they're out there, but my W-2 job soaks up 50+ hours per week right now.

To be clear, I have the 25%. I just don't want to spend it. As far as I'm concerned, I want as little of my cash in a REI as possible.

Thanks to everyone for your responses.

Originally posted by @Joe Splitrock :
Originally posted by @Roshard Jones:

I got a Mortgage through BOA with 100% financing, no closing costs up front and you didn't need to have good credit either. I just needed to have a few thousand in the bank to verify and it takes a while to close but worth it I'm not saying this to impress you or to sell you something. I'm saying it to encourage you to keep on looking for the best deal.

Was this owner occupied? The rules for owner occupied are very different than they are for investment properties. 

Yes, it was owner occupied but the point is there is a LOT of lenders out there and they're looking to make loans. You are the customer, not the other way around. Some of the lenders for investment properties will work with you all you need to do is explain your situation. You will probably get a lot of "No" but all you need to get is one yes If it's worth it to you and you've done your homework. If a deal is a deal you will find the money. There is no shortage of money out there.

Originally posted by @Tony Salemi :
Originally posted by @Joe Splitrock:

@Tony Salemi we are missing details. How many properties do you currently have on conventional financing, including your own? 

There are firm rules surrounding convention (Freddie or Fannie backed) mortgages. Where you will find differences is if the local bank is holding the mortgage or a non-conventional type of loan. The Freddie and Fannie guidelines are always changing. They tightened up after the financial crisis and have been loosening up since then. As you add more properties, the down payment and cash reserve requirements will change. So when you say it used to be common for 20% down, it could just be the number of properties you have. I had to do 25% on my last few properties. 

 Sorry.  Details are:

I have only 1 property with conventional which is in fact my PR. Very good credit (740 middle). Plenty of reserve (more than 24 months). Low DTI (25%), property cash flows nicely (6.1 GRM) and 20% cap rate.

I'm starting to think there's a few things going on.  This will not be a local lender keeping the loan in house.  It is a 2 unit property.  Maybe I could spend a little more time searching out lenders as it seems they're out there, but my W-2 job soaks up 50+ hours per week right now.

To be clear, I have the 25%. I just don't want to spend it. As far as I'm concerned, I want as little of my cash in a REI as possible.

Thanks to everyone for your responses.

Just simply connect with potential lenders through e-mail. That is what I did starting out. Find out what the terms are and get as much information initially and you can weed out the ones you don't want to work with. 

Originally posted by @Tony Salemi :
Originally posted by @Joe Splitrock:

@Tony Salemi we are missing details. How many properties do you currently have on conventional financing, including your own? 

There are firm rules surrounding convention (Freddie or Fannie backed) mortgages. Where you will find differences is if the local bank is holding the mortgage or a non-conventional type of loan. The Freddie and Fannie guidelines are always changing. They tightened up after the financial crisis and have been loosening up since then. As you add more properties, the down payment and cash reserve requirements will change. So when you say it used to be common for 20% down, it could just be the number of properties you have. I had to do 25% on my last few properties. 

 Sorry.  Details are:

I have only 1 property with conventional which is in fact my PR. Very good credit (740 middle). Plenty of reserve (more than 24 months). Low DTI (25%), property cash flows nicely (6.1 GRM) and 20% cap rate.

I'm starting to think there's a few things going on.  This will not be a local lender keeping the loan in house.  It is a 2 unit property.  Maybe I could spend a little more time searching out lenders as it seems they're out there, but my W-2 job soaks up 50+ hours per week right now.

To be clear, I have the 25%. I just don't want to spend it. As far as I'm concerned, I want as little of my cash in a REI as possible.

Thanks to everyone for your responses.

The current guidelines for Freddie/Fannie backed conventional state your first investment property would only require 15% down payment for a single family but for 2-4 units it would be a 25% down payment. So, yes in your case the duplex would require 25% down. This is an underwriting requirement, so anyone offering conventional Freddie/Fannie backed loans will require the 25%. 

Here is a link to a guide from Provident Bank Mortgage that explains the guidelines. The guidelines come from Freddie/Fannie, so would apply to any lender offering their products.

http://www.pbmwholesale.com/programs/A-1e%20Multip...

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