do I need 20% down on investment loan?

5 Replies

I have 3 investment properties now. My current properties I bought cash (using my HELOC on personal residence) they needed tons of work once I did all the work (sweat equity) and got them rented I would get a cash out 30 year loan to pay myself back. I could do this because when I was done the houses would appraise for a lot more then the loan amount I was asking for (I think my loans were for about 80% of house values).

I am looking at properties now that don't need a ton of work and I was looking at getting a standard mortgage from the start (instead of paying closing costs twice).  If I purchase a house that appraises for 135K and I pay 100k do I still have to put 20k down to get a loan, or could I get away with less money down?

Thanks   

@Kevin McDonald Are these potential properties SFH or MFH? Fannie/Freddie will allow you to go to 15% down on a just a normal, conforming loan. There are some other programs out there but they are usually based on median income levels or targeted areas. Of course you can go the route of a Non-Prime loan (higher rates, usually points).

Originally posted by @Kevin McDonald :

I have 3 investment properties now. My current properties I bought cash (using my HELOC on personal residence) they needed tons of work once I did all the work (sweat equity) and got them rented I would get a cash out 30 year loan to pay myself back. I could do this because when I was done the houses would appraise for a lot more then the loan amount I was asking for (I think my loans were for about 80% of house values).

I am looking at properties now that don't need a ton of work and I was looking at getting a standard mortgage from the start (instead of paying closing costs twice).  If I purchase a house that appraises for 135K and I pay 100k do I still have to put 20k down to get a loan, or could I get away with less money down?

Thanks   

Assuming Fannie money:

- If the purchase contract says $100k and appraisal says $135k, the appraisal figure is thrown out and the lender will only consider the purchase price.

- If purchase contract says $100k and appraisal says $95k, the purchase contract figure is thrown out and the lender will only consider the appraised value.

After six months on a refinance, purchase price is thrown out and only appraised value is considered regardless of which is less.

It is SFH.

Yes on my previous cash out loans I waited 6 months and they used the appraised value, I think I was allowed 80% of appraised value.  Doing the cash out loans was nice because at the end I literally got paid back 100% of what I have into the property (after sweat equity and making house appraise for higher value) so I was not using any of my own money.  The only draw back is I was paying closing cost twice (once on original loan and again in 6 months doing cash out). 

I was thinking this time if I could get away with putting 10% down, the house is in good shape so I can get standard loan I would put 10k down and only pay one set of closing costs.  

Thanks   

Originally posted by @Kevin McDonald :

It is SFH.

Yes on my previous cash out loans I waited 6 months and they used the appraised value, I think I was allowed 80% of appraised value.  Doing the cash out loans was nice because at the end I literally got paid back 100% of what I have into the property (after sweat equity and making house appraise for higher value) so I was not using any of my own money.  The only draw back is I was paying closing cost twice (once on original loan and again in 6 months doing cash out). 

I was thinking this time if I could get away with putting 10% down, the house is in good shape so I can get standard loan I would put 10k down and only pay one set of closing costs.  

Thanks   

 The down payment is still based on the purchase price, but if you're worried about the 1st set of closing costs knowing there will be a refinance in the near future...

...did you know that discount points can go the other direction and be a negative number, ie a lender credit towards most of the closing costs? Compare how much you can get in lender credit to 6 payments at the higher rate and see if it makes sense. 

thanks for info I will look into it 

Kevin 

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