Financing first deal

[Dabvis Le Sutton]

Good Morning BP,

I just got pre approved for financing my first rental at 70k. Originally the down payment required from lender was 5% but now they require 20% which take it from 3500 to 14k. If I put 14k my reserves will be weakened for about 2months. Any advice on how I can come up with the down payment without using all of my reserves?

[Jim Costa]

Hi Dabvis,

20% is pretty standard for an investment property.  Fannie Mae guidelines:

Investment Purchase for single-family is 85% and 2-4 unit is 75% LTV. Depending on the relationship with the seller you can ask the seller to carry 10%-15% with a 3 year payback period (you mentioned you would have funds in 2 years). 5% down 15% owner Cary and 80% LTV for the bank (have to qualify with extra payment to owner). You can entice the owner by paying a higher interest rate because of the small balance The difference between paying the owner 5% and 10% is only $20/month (for 3 years). You mentioned this is your first rental so I assume you have a primary residence. This is where a HELOC (Home Equity Line Of Credit) is perfect for your situation. Consider getting a HELOC on your primary residence. They are very inexpensive to get and you don't have any payments unless you use the loan. It is a line of credit and a good safety net for unseen expenses until you build reserves back up (piece of mind). These are a few options. Be sure the numbers work for your situation. Good Luck!