2013 - Smaller Downpayment on Investment Properties?

Question

Hi all, I was wondering if lenders have been relaxing their down payment requirements for residential multifamily properties.
I saw this company First Commerce Financial has a 15% DP program (I'm pretty sure you end up with a higher rate/fees though)
What is the industry standard now? Still 25%?

Any info would be helpful. I'm working on my first deal. I have $30k cash and want to weigh out whats available to me, financing wise. My credit is 760+ and I have 1 year rental income on my tax returns(via renting out my spare rooms in my home)

George Paiva · Answer

When I did my commercial loan in 2012 they didn't want more than 40 DTI or Less than 1.2 DCR on property.  In the end it came down to the appraisal.

I never had any banks that I dealt with ask for 2 years of rental income.  I deal with small regional in the area the property is being bought.

Mehran K. · Answer

Again, thanks for the input everybody!

Ben Leybovich · Answer

Most lenders will not consider DSCR of under 1.2  In fact, in this market a lot of them want to see 1.4

George Paiva · Answer

Only this one because it was multi-use.  Most I have done are the residential it was all based on your income and debt not the property income.  Usually these deals you have to go strong with 20-30% down then $20-50k in rehab.  Its as conventional as it gets.

My next venture is in the 15+ but I may have to go 25+ because like Derrick Moore many lenders don't want to lend less than $750k or they lock you in with penalties if you sell the property before the time loan is serviced. Mostly to avoid the flips.

Derrick Moore · Answer

Mehran Kamari, no worries! soon you will be there. I am still scratching and pawing too. And getting good knowledge from you guys,
thanks.

Derrick Moore · Answer

Paul Cordero, yes you are right!

Mehran K. · Answer

Found this on Bankrate:
Buyers of a duplex or multi-unit home can sometimes use the rental income from the additional units to qualify for a loan, but in general, the renters must have already signed a lease so that the rental payments can be verified.

"A percentage of the rental income is included as part of the underwriting for a loan," says Bill Mullen, president of NE Moves Mortgage in Waltham, Mass. "However, if the property is vacant you can't base a loan approval on anticipated rent payments. Some lenders may use a market analysis to estimate the rent, but in general they are very reluctant to lend a higher amount than the buyer qualifies for on their own unless there are renters in place."

Read more: http://www.bankrate.com/finance/mortgages/how-to-finance-a-duplex-or-multi-unit-home.aspx#ixzz2L083Ejg8
Follow us: @Bankrate on Twitter | Bankrate on Facebook

Paul Cordero · Answer

Unlike commercial lending (correct me if I am wrong), I don't know of any conforming lender that will use future rents as income.  So this would be excluded.

Mehran K. · Answer

Paul Cordero by boarder income do you mean the roommates I have in my primary residence? If so, my last question I meant the rents that would be realized by the property being purchased(investment property) Is that counted toward DTI? Or do they just exclude that and use those numbers for their DCR requirement?

George Paiva Were those deals you did with the small regional banks all commercial loans? I'm interested in how they treat residential MFH (2-4 Units).

Derrick Moore $750k minimum, ouch out of my league... for now.

Derrick Moore · Answer

for multifamily we are doing 20% and our minimum is $750,000 though when we want to be a little more aggressive we go 15% down. , and we are  NOT  using tax returns. Underwriting based on income and expensive of the building but also good clean bldg, and well managed and you now the rest. But like Paul C said; 2 years rent roll and 3 years operating statement.

2013 - Smaller Downpayment on Investment Properties?

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