Do I really need 25 percent down?

[Shelley W.]

Ugh! I'm just getting ready to make my first investment and I learned tonight that lenders will likely want 25% down on an investor non-occupied conventional loan. I've done so much research and learning, and somehow I missed that critical point. Is that correct? Does anyone have recommendations for lenders that will accept 20% down?

[Joe Splitrock]

@Shelley W. a conventional mortgage can be conforming or non-conforming. Conforming loans meet Fannie Mae or Freddie Mac underwriting standards, which require 25% down payment for non-owner occupied duplex. If you are talking to a lender that is writing conforming loans, there is no way around the 25% down.

A conventional mortgage doesn't have to be conforming. In that case the lender will hold the mortgage and it is then subject to that lenders own rules. They may allow 20% down, but you will pay a higher interest rate or have a shorter term on your rate lock compared to a conforming loan.

Some banks have loan committees who review and approve. They will look at your situation and the investment details, prior to making a decision. A new investor may have more difficulty than an established investor, because you are higher risk. Your personal credit history, net worth and employment will also be a factor.

I would contact several local lenders. Tell them specifically you need a 20% down, non owner occupied and therefore non conforming loan. See what each bank has to offer and go from there. Be aware even if one person got offered a certain rate, the lender may not offer you the same.