Downgrading - Loan of 5% vs 20%

[Phillip Faries]

Hey All, 

I'm trying to buy my 3rd property but don't want to pay the 20% down payment. I figured I would just move from my current place and rent it out, while moving into the new place, thus taking advantage of the 5% down payment. My mortgage broker just advised me that banks "lenders" don't like when an investor downgrades, in my case, going from a 2 bed in downtown Chicago to a 1 bed a little further out. Something about banks not trusting or believing that a Investor would want to downgrade and is only pretending to move to take advantage of the 5% down payment.

Nonetheless, I broke it all down, giving the reasons for wanting to move, I'll save 9k in mortgage payments, 2k in utilities, and make 3k cash flow renting my current condo, over all it's simply financial, what's so hard to understand that ........ But he thinks I'm not going to get approved for the 5% down payment loan and will need to do the 20% one.... Which I can't do as it will kill my cash reserves for my current properties.

Has anyone had issues with getting a 5% conventional load by downgrading to a smaller place.

Thanks for your help!