5% down on an investment

[Spenser Harding]

Working in a bank, I have talked to many mortgage pros on financing options for investment properties. Since I used the conventional 5% down with pmi on my primary residence in 2012, I wondered if it was possible to get that financing on an investment property somehow. As a colleague of mine told me it would only be possible to get that type of financing again if it "clear" I was moving to the newly purchased property and I had a renter lined up for my current home. To me this is a bit of gray area - pertaining to business practices and moral/ethical standards. It is true that investment properties typically require 20% down, however when this option was shown to me by a pro, I don't know whether to follow the lead and label it "creative financing" or stick to the bank rules of the game and apply 20% down. Any BP's members ever heard of this or used this before and what are your thoughts to the ethics of this??? Still being new to investments, I still haven't purchased a property, I want to know if this violates some sort of investor code of conduct and how would a bank even find out??

[Aaron Montague]

@Spenser Harding

There are several great ways to get into investment housing for 5% or less, it just requires that you live in the property for a while. Generally a year.

Once the year is up, most of these loans (not sure on the NACA) allow you to move and rent out the property. You can't get another loan of the same type if you hold one. I don't think anything prevents it legally, but I doubt there are too many lenders out there that would write another of these types of loans with another on the books (Have FHA and try to get Homepath, etc)

0% Down:
NACA (https://www.naca.com)
VA Loan (http://benefits.va.gov/HOMELOANS/index.asp)

3.5% Down
FHA (http://portal.hud.gov/hudportal/HUD?src=/topics/buying_a_home)

3.5% AND Renovations
FHA 203k loan (http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/203k/203kabou)

5% Down
Homepath Owner Occupied

Not as cheap, but come with renovation options attached to the loan:
10% Down
Homepath Investment (SFH only)

20% Down
Homepath Investment (Duplex only)

25% Down
Homepath Investment (3-4 Unit Buildings)