10% Down Conventional Mortgage (Non FHA) - Philadelphia

[Derek Pheiffer]

I am currently looking for a few different mortgage loan options around Philadelphia, Pa in the range of a 5-10% down payment. I've already been pre-approved by several institutions, however the lowest offered has been 15%. I knew this would be a challenge as I do not plan to live in this property (so throw FHA out the door), however I was surprised that even the smaller time lending shops weren't as flexible.

Anyone in the area familiar with any particular banks/lenders that would be able to rival the FHA down payment options

[Chris Mason]

Originally posted by @Derek Pheiffer:

I am currently looking for a few different mortgage loan options around Philadelphia, Pa in the range of a 5-10% down payment. I've already been pre-approved by several institutions, however the lowest offered has been 15%. I knew this would be a challenge as I do not plan to live in this property (so throw FHA out the door), however I was surprised that even the smaller time lending shops weren't as flexible.

Anyone in the area familiar with any particular banks/lenders that would be able to rival the FHA down payment options

Up to you if you want to take a double digit interest rate, but that's basically what you are asking for.

15% down is the minimum required by Fannie Mae for a SFR investment property. Once your loan is funded, it will be thrown into a mortgage backed security of 1000 mortgages (this is true even if the servicing does not change hands, mortgage servicing and mortgage ownership are divorced). Because your $500k mortgage is in there, the mortgage backed security might sell for $515k more, either to Fannie, or to a higher bidder. That $515k represents $15k in profit, and they can turn around and fund someone else's $500k mortgage, potentially flipping the same $500k block of money 3 or 5 times per year. Your $1200 underwriting fee and 3.5% or 5.5% interest rate are a VERY small part of where the money is made.

If your loan does not follow the Fannie rules, it can't be part of that MBS, and that $15k (or whatever the number is), plus the opportunity cost of not being able to flip the $500k block of money 3-5 times a year, has to come from somewhere else. That's you, since you are the one requesting a non-Agency non-saleable mortgage.