Does an investor need to put 20-25% down?

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Jay HurstBusiness Member
Lender · Dallas, TX · Member since 2017 · 1k+ posts · 1k+ votes
4y
Quote from @Chris Stewart:

Are there lenders that will allow me to put less than 25% down on a sfh as an investor?  If so, which?


You can put down 15% on a single family home using a conventional loan. We do it all the time for borrowers.  This allows you save capital for the next deal. 

https://singlefamily.fanniemae...

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  • Sergey A. Petrov
    Real Estate Consultant · Seattle, WA · Member since 2022 · 1k+ posts · 784 votes
    4y

    20% is more typical. 25% is sometimes required. Where that 20% comes from is a different question!

    0Reply
  • Chris Stewart
    OP
    Member since 2022 · 8 posts · 4 votes
    4y

    Thanks!  Are there any traditional mortgage lenders on BP who don’t require 20%?

    0Reply
  • Sergey A. Petrov
    Real Estate Consultant · Seattle, WA · Member since 2022 · 1k+ posts · 784 votes
    4y

    Doubtful. I am sure some lenders will chime in. If you own another property with enough equity, you could pull the downpayment from there…

    0Reply
  • Jim Pellerin
    Real Estate Consultant · USA · Member since 2014 · 1k+ posts · 751 votes
    4y

    Be careful. The more you leverage a properly make sure it still cashflows.

    2Reply
  • Theresa HarrisPro Member
    Member since 2019 · 15k+ posts · 11k+ votes
    4y

    As other said 20% is the norm and Jim's point is dead on that with less down, your chances of cash flowing is a lower.  You can do 5% if you are going to live in the unit.  So you could live in half of a duplex, rent the other half out.  Then if you move 1-2 years later, rent out the half you were living in.

    1Reply
  • Melvin ListBusiness Member
    Lender · Tampa, FL · Member since 2016 · 1k+ posts · 381 votes
    4y

    20% is the normal down payment for an investment loan.  The pricing is much better if you put down 25%.

    C2 Financial
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    0Reply
  • Jay HurstBusiness Member
    Lender · Dallas, TX · Member since 2017 · 1k+ posts · 1k+ votes
    4y
    Quote from @Chris Stewart:

    Are there lenders that will allow me to put less than 25% down on a sfh as an investor?  If so, which?


    You can put down 15% on a single family home using a conventional loan. We do it all the time for borrowers.  This allows you save capital for the next deal. 

    https://singlefamily.fanniemae...

    Hurst Real Estate, INC4.991 Reviews
    WebsiteView Page
    3Reply
  • Steven Foster Wilson
    Rental Property Investor · Columbus, OH · Member since 2017 · 3k+ posts · 3k+ votes
    4y
    Quote from @Chris Stewart:

    Are there lenders that will allow me to put less than 25% down on a sfh as an investor?  If so, which?


     Pretty much it is always the 20% unless you are doing an owner-occupant loan. Sometimes with hard money, you can find less but the numbers then do not always line up because of the rates. 

    0Reply
  • Marcos Gonzalez
    Lender · Auburn, AL · Member since 2018 · 67 posts · 35 votes
    4y

    If its SFR you can do 15% with PMI.

    0Reply
  • Chris Stewart
    OP
    Member since 2022 · 8 posts · 4 votes
    4y
    Quote from @Jay Hurst:
    Quote from @Chris Stewart:

    Are there lenders that will allow me to put less than 25% down on a sfh as an investor?  If so, which?


    You can put down 15% on a single family home using a conventional loan. We do it all the time for borrowers.  This allows you save capital for the next deal. 

    https://singlefamily.fanniemae...

    Which lenders are offering this?

    0Reply
  • Jay HurstBusiness Member
    Lender · Dallas, TX · Member since 2017 · 1k+ posts · 1k+ votes
    4y

    ANY conventional lender should be able to do this. The link above is directly from Fannie Mae site. Nothing tricky. We do them ALL the time. Closed one yesterday in fact. 

    Hurst Real Estate, INC4.991 Reviews
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  • Chris Stewart
    OP
    Member since 2022 · 8 posts · 4 votes
    4y
    Quote from @Jim Pellerin:

    Be careful. The more you leverage a properly make sure it still cashflows.

    Luckily I’m not depending on big cash flow at this point. Primarily looking to set up my long-term portfolio for appreciation and eventually cash flow, as well as tax benefits. But thanks for the good advice.  
    0Reply
  • Joseph Stern
    Investor · Tampa, FL · Member since 2020 · 287 posts · 152 votes
    4y

    @Chris Stewart hey Chris, will this be a straight rental? Have you thought about buying a fixer upper that will allow you to put 10% down then refi into a dscr loan afterwards? You can also look for high equity sellers who will hold the note and let you put less than 20% down.

    0Reply
  • Zach Wain
    Scottsdale, AZ · Member since 2019 · 434 posts · 248 votes
    4y
    Quote from @Chris Stewart:

    Thanks!  Are there any traditional mortgage lenders on BP who don’t require 20%?


    Yep! Conventional guidelines allow for 15% down on rental properties (10% down on vacation homes), but the rates are higher than if you put 20% down. 25% down gets you the best conventional rates (unless you hit 40% down). For DSCR investor loans (cash flow only loans), many lenders allow for 15% down, but again, 20% or 25% will get you better rates/reduced prepayment penalties/reduced cash flow requirements.

    Let me know if you have any questions

    1Reply
  • Chris Stewart
    OP
    Member since 2022 · 8 posts · 4 votes
    4y

    Thanks for the info all

    0Reply
  • Chris Stewart
    OP
    Member since 2022 · 8 posts · 4 votes
    4y
    Quote from @Trevor Alexander:

    Hi Chris - I'm a Lender with Academy Mortgage and we have an investment loan for 1-4 unit properties requiring 10% down with no PMI. The program follows all your standard agency guidelines as a standard 20-25% conventional investment loan. It's a 30-year fixed loan with a balloon payment in 15 years; so, the idea is to refi or sell within 15 years before the payment is due. It's the best investment program I've personally seen in the industry. We can offer it in WA, OR, AZ, ID, NV, NM, OR, and UT.

    Happy to discuss it further if you like. I see you are in WA, and I am licensed there (live in OR). 

    At what rate?
    0Reply
  • Trevor Alexander
    Lender · Corvallis, OR · Member since 2021 · 93 posts · 54 votes
    4y

    Current rate as of today assuming 740 credit is 6.125 for 2.25 points.

    0Reply
  • Erik EstradaBusiness Member
    Lender · Member since 2022 · 6k+ posts · 1k+ votes
    4y
    Quote from @Chris Stewart:

    Are there lenders that will allow me to put less than 25% down on a sfh as an investor?  If so, which?


     Most lenders require 25% down. If you explore the hard money/private money space you could do a cross collateral loan if you own other properties and have some experience. 

    [email protected]818-269-7983
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  • Jon A.
    Asheville, NC · Member since 2017 · 385 posts · 274 votes
    4y

    Keep in mind that you need 20% down usually to get around the requirement of mortage insurance, although some on this thread have obviously said they can do 15% without it. It sounds like a lot up front, but so is mortgage insurance when you look at cash flow. 

    0Reply
  • Chris MasonPro Member
    Moderator
    Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
    4y

    The other comments are pretty much spot on. Yes, you can do less than 20% down, and yes it gets expensive, and yes it'll often nuke your cashflow and/or come with unusually high fees.

    If you're stuck in that position because that's all you have, unfortunately, the system is "working as intended." Smokers pay more for life insurance because that's an obvious risk factor, same thing here, "it's a feature, not a bug," and it's not personal either. 

    However. If you're in that position of seeking a lower down payment because you're funds and/or net worth are tied up in other investments, the system will continue to work as intended (just as it does for life insurance, for healthy non-smokers), and "borrowed funds secured by financial or real estate assets" can be used for down payment, cash to close, and the rest. That's your 401k loan, your margin loan, the HELOC on another property, cash out refinance proceeds, and so on. So instead of one expensive loan with <25% down, you can finance it with a pair of cheap loans (which will often yield better results, lower total fees, better cashflow, etc)... Fannie + HELOC, Fannie + 401k loan, Fannie + margin loan, and so on, and effectively (in many cases) get into it with ZERO percent down.

    2Reply
  • Chris Stewart
    OP
    Member since 2022 · 8 posts · 4 votes
    4y

    Thanks Chris for the info 

    0Reply
  • Blake Choisnet
    Investor · Tyler, TX · Member since 2021 · 33 posts · 31 votes
    4y
    Quote from @Trevor Alexander:

    Current rate as of today assuming 740 credit is 6.125 for 2.25 points.


     If you ever offer this in TX sign me up!

    2Reply
  • Blake Choisnet
    Investor · Tyler, TX · Member since 2021 · 33 posts · 31 votes
    4y

    Does anyone know of any loan products that allow an investor to get 80% LTV on appraisal at purchase?

    ex: Property worth $100k, have it under contract for $80k. Come to close and only pay closing costs.

    This would be 20% equity, but not 20% LTC. 

    0Reply
  • Grant SchroederPro Member
    Lender · OR ID AZ CA WA CO NV TN MT · Member since 2018 · 598 posts · 312 votes
    4y
    Quote from @Chris Stewart:

    Are there lenders that will allow me to put less than 25% down on a sfh as an investor?  If so, which?


     Chris, you can put as little as 10% down and no MI on a 1-4 unit investment property with Academy Mortgage.

    [email protected]541-231-1256
    2Reply
  • Ryan Deasy
    Lender · Farmington, CT · Member since 2015 · 542 posts · 321 votes
    4y

    @Chris Stewart

    have you looked into hard money. most will let you get into the deal with less than that. ive done that many times. happy to share my contact.

    0Reply
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