I am trying to buy my first investment property but am running into different stories on what a person needs down on a non owner occupied property.
My story is this..
I haven't owned a house in over three years.I have free housing with my job. My last credit score was a 735. I only have one bill for 365.00. a month.
So what kind of financing are you getting and what kind of down should I expect.
For conventional loans, most loan officers I talk to require 25% down. I was able to find only 1 local bank here who only needs 20% down for SFR. For duplexes, they still want 25% down. This applies to 1-4 properties. For the 5th-10th property, it's 25%.
Ok now that I am off of the phone and can type with more than one hand I will add a little more.
I spoke to mortgage broker number one. He stated that there is a program out there for 5.5 percent interest and 15% down.
Then I spoke to my local bank and she stated that I could do 10% down on a NOO loan.
I then spoke to mortgage broker number three and she stated that it would take 20 to 25 % down. She said you can not get Mortgage insurance anymore so they want more down. She also stated that my local banker may be way off base due to the same fact that MI company's went bankrupt and the remaining ones dont want to insure investment property's..
So what is true here? And what is my best bet?
Call all the same banks and maybe even a few others. Ask to speak to a loan officer or underwriter who can handle non-owner occupied real estate investments. Then ask that person your questions.
That is the type of person who will give you the answer you seek.
Skip the Mortgage Brokers, residential lenders. Go to your community bank as a confident borrower and talk to the commercial bank. Go in with a plan, Commercial paper at your local community bank is NOT sold. This gives them way more options on what they do. This will not be easy by any means. Your going to have to golf, lunch with the decision makers and convince them your a solid bet. Now along with that, your not going to get 5.25% your going to be paying around 6.75% with at least a point, your term will be max 3 years. These guys will do 100% of cost, if you are smooth enough as long as its below 80% After-Completed Value. Most likely starting out your going to have to pay for the rehab and they will put the funds needed for the rehab in escrow. Once the rehab is done they will release your escrow. There will be other issues such as DTI cash reserve but as long as those are OK you should be good. We often walk into closings with a pen and walk out with a small check.
Last year, I was able to buy a NOO REO with 20% down. Today, I talked to that same loan officer, currently at another lender, who said it would take 25% down. I hear the same thing from another broker I've been speaking with.
Now, our credit union, which accepts mortgage applications for investment properties with the same level of enthusiasm most men demonstrate waiting for a prostate exam, want anywhere from 25-35% down depending on credit score.
Wow Mitch that is pretty sad to say the least..I am going to go back to my bank on monday and sit down with the mortgage lady. This will give me time to fine tooth the whole deal. If it ends up that I need twenty percent or more down it will stop me from buying.
Originally posted by Bryan Balk:
Skip the Mortgage Brokers, residential lenders. Go to your community bank as a confident borrower and talk to the commercial bank. Go in with a plan, Commercial paper at your local community bank is NOT sold. This gives them way more options on what they do.
This has been my experience as well...very small, local banks that provide portfolio loans and can basically do whatever they want...
Like Bryan said, they will have to WANT to work with you, they'll likely want to see that you have experience, at least decent credit and some cash reserves...
You have good credit and an income, so you start with the banks.
Unless you are purchasing a large apartment complex, you do not speak with the commercial loan officer. For single family homes, or duplexes, you get a non-owner occupied home mortgage.
I'd sure hope you could do better than 5.5%. NOO should only be 1/2 a percent or so more than OO.
You will have to come up with a pretty substantial down payment. That's the new reality.
Loan packages vary quite bit between banks, so you will do better if you go around and interview several loan officers from different banks.
My opinion: it is a really bad time to take out a variable rate mortgage. There is no room to go anywhere but up from here on a variable.
My opinion: it is a really bad time to take out a variable rate mortgage. There is no room to go anywhere but up from here on a variable.""""""""""""""""""""""""""""
I agree and I dont plan on doing so. I will stay with a fixed rate
I am hearing 20% down is pretty standard right now. You can likely get different terms from a portfolio lender, but the amortization period and interest rate will likely be worse.
What are you goals for the loan? To minimize the cost of money you will need to put more money down.
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