20% down for investment property
I was looking to purchase rental properties. The agent I spoke with stated i'd need at least 20% down which is more than I anticipated.is this true?
Can I use an FHA loan?? any and all information would be helpful. Thanks in advance.
It you are not going to occupy the house, then most likely you will need 20 % down.
Daniel O., if you can find a good enough deal, it is possible to use a hard-money lender to finance 100% (or close to it) of purchase+rehab, as long as that amount does not exceed 65% of the post-rehab appraised value (prior to lending, the lender will do a "subject to" appraisal to determine the value of the property after rehab is complete).
You can then refinance with a bank after the rehab is done, using the new higher appraisal as the basis for computing the 75-80% LTV. If you bought right, and managed the rehab effectively, you have the potential to have little or none of your own funds into the deal. You'll spend a fair amount on the HML lending fees, but it can get keep you in the game.
Now, in practice a HML is less likely to give a green newbie a 100% loan. But if you find a good enough deal, and can show that you have a good team around you (agent, contractor) it is entirely possible.
You can check out HomePath.com which sells Fannie Mae properties. If you find one qualified for the HomePath program, investors only need to put down 10% (until you get to more than 4 mortgages in which case it reverts back to 20%).
To jump on Dawn's bandwagon, you can also use Homesteps.com which is Freddie Mac's properties. different rules, but similar objective
I second Ray. If you're able to find a 2+ family, where you will be able to do an owner occupy, then you can definitely do FHA mortgage and even 203K.
Hi Daniel,
Unless you go through Homepath or Homesteps, or a hard money lender, you will need 20% down. Also, I found that if it's a multifamily, they want 25% down.
Kelly
Thanks Guys!
Ive gone on homepath.com and it seems they are mostly online offers. Would I have to refer my agent to this website?
Also, have any of you personally used homepath.com or homesteps.com?
Daniel, your agent should already know how to submit Homepath offers and I believe they are listed on MLS as well as homepath site. Be very careful if he/she isn't familiar with them. They (homepath) are not as friendly to investors regarding inspections and I've heard they will keep your deposit for almost any reason if the deal doesn't actually close. You should really have an agent familiar with this process, or at least make sure they work directly with their broker's help so you don't get caught up in mistakes in their learning process.
I thought the down payment requirement was 25% for investors with 4 or more mortgages.