Putting down < 20% w/o Owner-Occupant? Can it be done?

[Jelani Tate]

To all,

As a new real estate investor, I have a lot of questions. One of those questions is: It possible to put down less than 20% on properties, without being an owner-occupant? I am in Illinois, looking to invest in the Western Suburbs, specifically Aurora, Naperville, Oswego, Batavia, etc. My focus is single family homes, duplexes, triplexes, and quads. I am looking for creative financing options for low (or no) money down.

Are there specific Illinois regulations that differ from other states?

Thank you all for your feedback and help with this question.

Jelani Tate

[Heather DeGeorge]

Hard money lenders will loan out at less down. But definitely not a traditional banker. Traditional bankers also won't count equity towards that 20%. Example: I bought a house for $159k and the bank's appraisal came back at $186k. So, the equity--before putting any money down--was already 15%. But if I only put another 5% down, they would not have looked at it as having 20% down. We were house-hacking that one so it was owner occupied and we wound up paying PMI until we refinanced. Despite the fact that there was more than 20% equity in the house. They want to see 20% out of your pocket.

And to refi you usually have to have 25% equity.  So if you put 20% down and think you're going to refi for a better rate in 6mo (without having done improvements) then the market better have had a major uptick because you wouldn't have the equity to refi yet.