25% down for 2-4 unit properties?

[Dallas Easter]

I have been looking for a good local lender in my area and several of the banks are telling me that its 25% down for 2-4 unit properties. Is this bank specific or has the requirement to put down gone up? I've noticed a lot of people use 20% down in the examples they share as well as with the webinars I have watched on this site. Wondering if someone could give some insight to their personally experiences. Thanks

[Chris Mason]

Originally posted by @Dallas Easter:

I have been looking for a good local lender in my area and several of the banks are telling me that its 25% down for 2-4 unit properties. Is this bank specific or has the requirement to put down gone up? I've noticed a lot of people use 20% down in the examples they share as well as with the webinars I have watched on this site. Wondering if someone could give some insight to their personally experiences. Thanks

20% is for SFR investments per both Fannie and Freddie (keep in mind if you live there, it's not an investment even if it is in your head, this entire post does not apply). 25% is 2-4 unit per both Fannie and Freddie. A lot of the people deemed worthy enough to be podcast guests have blown past being in the Fannie world, they are getting commercial loans, they're 5 or 10 years removed from having to think about Fannie requirements. Or, alternatively, a lot of content on podcasts as it pertains to mortgages is just plain wrong.

There are non-Fannie loans for 2-4 unit investment properties, but the rate/fees/etc will be higher, term likely shorter than 30 years. You would need to be getting a significantly better deal on the purchase price than average for it to still make sense. Many of them are DSCR-based, and at the MLS price it may not pass the DSCR test. The MLS price winds up bid up to where it makes sense for the overwhelming majority putting 25% down in a Fannie loan, that's where our Econ 101 "supply and demand curves" meet in the middle on the fictional perfectly efficient open market that they pretend exists in Econ 101 (these podcast guests probably paid the MLS price for their first few properties, but haven't paid the MLS price for the last bunch of properties).

All things in life have self-selection bias. :)