Starting out--Mortgage Pre-aproved

11 Replies

Hi all, I'am looking to start my portfolio with multifamily properties. Good news i got preaproved few days ago. Conventional loan 25% down for an investment property since it would be my first purchase. 10% is my down is my goal. If i acquired a small loan for a condo and then 6 months later get a large loan for a 2-4 doors will that quality me for a 10% down since it would not be my second purchase? Sidenote, l have a good amount saved and credit score over 830 Thanks!!
Originally posted by @Jean Joseph :
Hi all, I'am looking to start my portfolio with multifamily properties. Good news i got preaproved few days ago. Conventional loan 25% down for an investment property since it would be my first purchase. 10% is my down is my goal. If i acquired a small loan for a condo and then 6 months later get a large loan for a 2-4 doors will that quality me for a 10% down since it would not be my second purchase? Sidenote, l have a good amount saved and credit score over 830 Thanks!!

 Hi Jean,

Gonna have to be the wet blanket on this one, sorry.

Assuming you want an interest rate and mortgage terms that'll actually let the real estate cashflow, plan on 25% down for each 2-4 unit investment property. I get stuff in my inbox about "zomg 20% down four unit investment property, call for details!" from end lenders looking for my brokered business, and when I "call for details" the rate is always like 9% on an adjustable with prepayment penalties (meaning a big $$$ penalty if you refi too soon)...

You can make less down happen with less on owner occupied real estate, however. Good luck.

@Jean Joseph

  20-25% down for investment properties is pretty standard no matter what number invenstment property it is. I have heard other investors say they've done 15% down but I've never personally talk to a lender that would do that.

  If you're able to do that I'd start out that way over a condo personally. If it's your first home you can move into one unit and be eligible to put 3.5% down.

- Mike

Your buying power won't increase by buying a condo and holding it for 6 months, chances are you are going to decrease your buying power unless you find a crazy deal on a condo that cash flows like crazy which is unlikely, Also only six months of holding will not be enough to count as income. You sound like a prime candidate for a house hack unless you have family or something that a duplex or fourplex can't accommodate( for instance, you have too many kids to stack into one unit of a fourplex).

Originally posted by @Michael Kistner :

@Jean Joseph

 I have heard other investors say they've done 15% down but I've never personally talk to a lender that would do that.

It's SFR only, but also really quick way to get a rep for high rates, so many lenders will decline to offer it.

Originally posted by @Michael Kistner :

@Chris Mason

Is that Bay Area specific? Because I haven't had an issue coming in with 15% down on SFR.

  I can see the demand out there being higher so they wouldn’t want that rep. That’s interesting. 

- Mike

 No, it's from Fannie. Take a look:

The normal investment property interest rate pricing hit that you're used to w/ 25% down is 2.125. With 15% down, that hit is essentially doubled

@Jean Joseph I don't know how much you're investing, but since you're already investing out of state, try finding a 2-4 plex as your FIRST investment. I'm thinking you might find a plex in a different state for a similar price as that condo. Then you're already up 2-4 doors. The only reason (to me) to get a condo is because they're local and cheap. Once you're not concerned with being local, you ought to be able find something better cheap.
@Jean Joseph . You can do 15 percent down for single family, I just did this and got 5.625 percent rate which seems fairly competitive. Probably .25 higher then if I put 20 percent down. Going forward I’ll just do 25 percent down. Since I’m getting more mortgages now and rates will be higher then anyways. It’ll be 25 percent down for multifamily