25% down required?

[Dave Elim]

Hi all,

Got an offer accepted on an income property duplex in Wisconsin for 125k and the lender is asking for a minimum of 25% down.  Is this normal?  

We currently own an ADU that is on our property that we have a HELOC on which he is stating is the reason for the high down payment requirement (the duplex is now considered a second investment property). Our credit is 800+ with no car debt and income of over 140k. Really don't want to put this much down so just wondering what my options are? Find a new lender?

[Jay Hurst]

Quote from @Dave Elim:

Hi all,

Got an offer accepted on an income property duplex in Wisconsin for 125k and the lender is asking for a minimum of 25% down.  Is this normal?  

We currently own an ADU that is on our property that we have a HELOC on which he is stating is the reason for the high down payment requirement (the duplex is now considered a second investment property). Our credit is 800+ with no car debt and income of over 140k. Really don't want to put this much down so just wondering what my options are? Find a new lender?

 You are likely being quoted a conventional loan which will carry the best rate and overall terms. ALL conventional loans will require 25% down for a non-owner occupied 2-4 unit property.  

Fannie loan to value chart

As suggested above, you can potentially get a DSCR (debt service coverage ratio) loan with just 20% down on a 2-4 unit. However, weigh the pro's and con's. I see a lot of folks pay two points more to put down 5% less (plus a pre-payment penalty etc) but, think about that. 2% points is literally cash out the door on never going to get back fees, where if you actually put down 5% more you will have all 5% as equity. (and get a better overall financing package.)