10% Down Conventional Mortgage (Non FHA) - Philadelphia

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10% Down Conventional Mortgage (Non FHA) - Philadelphia

Derek Pheiffer
Rental Property Investor · Philadelphia · Member since 2020 · 8 posts · 3 votes

I am currently looking for a few different mortgage loan options around Philadelphia, Pa in the range of a 5-10% down payment. I've already been pre-approved by several institutions, however the lowest offered has been 15%. I knew this would be a challenge as I do not plan to live in this property (so throw FHA out the door), however I was surprised that even the smaller time lending shops weren't as flexible.

Anyone in the area familiar with any particular banks/lenders that would be able to rival the FHA down payment options


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Chris MasonPro Member
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Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
6y
Originally posted by @Derek Pheiffer:

I am currently looking for a few different mortgage loan options around Philadelphia, Pa in the range of a 5-10% down payment. I've already been pre-approved by several institutions, however the lowest offered has been 15%. I knew this would be a challenge as I do not plan to live in this property (so throw FHA out the door), however I was surprised that even the smaller time lending shops weren't as flexible.

Anyone in the area familiar with any particular banks/lenders that would be able to rival the FHA down payment options


Up to you if you want to take a double digit interest rate, but that's basically what you are asking for.

15% down is the minimum required by Fannie Mae for a SFR investment property. Once your loan is funded, it will be thrown into a mortgage backed security of 1000 mortgages (this is true even if the servicing does not change hands, mortgage servicing and mortgage ownership are divorced). Because your $500k mortgage is in there, the mortgage backed security might sell for $515k more, either to Fannie, or to a higher bidder. That $515k represents $15k in profit, and they can turn around and fund someone else's $500k mortgage, potentially flipping the same $500k block of money 3 or 5 times per year. Your $1200 underwriting fee and 3.5% or 5.5% interest rate are a VERY small part of where the money is made.

If your loan does not follow the Fannie rules, it can't be part of that MBS, and that $15k (or whatever the number is), plus the opportunity cost of not being able to flip the $500k block of money 3-5 times a year, has to come from somewhere else. That's you, since you are the one requesting a non-Agency non-saleable mortgage. 

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  • Jacob Sampson
    Investor · Topeka, KS · Member since 2015 · 1k+ posts · 1k+ votes
    6y

    15% down is good.  I generally put 20% down.  I would just save more money.

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  • Kevin MoyerBusiness Member
    Property Manager · Philadelphia, PA · Member since 2019 · 269 posts · 301 votes
    6y

    I don't think anything can come close to the FHA terms. To the best of my knowledge- conventional loans have decently strict federal guidelines as to what's required for down payments and occupancy.

    I don't know of any investment loans that will go lower than 15% down outside of some kind of private deal. Interested for someone to chime in to prove me wrong.

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  • Joseph ScoreseBusiness Member
    Banker · Philadelphia · Member since 2009 · 2k+ posts · 629 votes
    6y

    @Derek Pheiffer  all depends on your income with a 5% down product and restricted to two families conventional purchase. regards joe scorese

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  • Chris MasonPro Member
    Moderator
    Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
    6y
    Originally posted by @Derek Pheiffer:

    I am currently looking for a few different mortgage loan options around Philadelphia, Pa in the range of a 5-10% down payment. I've already been pre-approved by several institutions, however the lowest offered has been 15%. I knew this would be a challenge as I do not plan to live in this property (so throw FHA out the door), however I was surprised that even the smaller time lending shops weren't as flexible.

    Anyone in the area familiar with any particular banks/lenders that would be able to rival the FHA down payment options


    Up to you if you want to take a double digit interest rate, but that's basically what you are asking for.

    15% down is the minimum required by Fannie Mae for a SFR investment property. Once your loan is funded, it will be thrown into a mortgage backed security of 1000 mortgages (this is true even if the servicing does not change hands, mortgage servicing and mortgage ownership are divorced). Because your $500k mortgage is in there, the mortgage backed security might sell for $515k more, either to Fannie, or to a higher bidder. That $515k represents $15k in profit, and they can turn around and fund someone else's $500k mortgage, potentially flipping the same $500k block of money 3 or 5 times per year. Your $1200 underwriting fee and 3.5% or 5.5% interest rate are a VERY small part of where the money is made.

    If your loan does not follow the Fannie rules, it can't be part of that MBS, and that $15k (or whatever the number is), plus the opportunity cost of not being able to flip the $500k block of money 3-5 times a year, has to come from somewhere else. That's you, since you are the one requesting a non-Agency non-saleable mortgage. 

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