Taking the next step - Second Home/Mortgage Financing

[Alexander Straffin]

Hi All,

I have a single mortgage on a townhouse which is my primary residence.

My wife and I are ready to purchase a Single Family investment property in Massachusetts but our bank is telling us we need to have 25-30% down! We would like to purchase the home as a rental property, so moving in to get FHA/Primary Residence isn't going to work.

Are there any other tricks to skirting the +25% down payment without taking on partners?

Are there any banks that you know of that will give a good mortgage on a SFR rental if you can prove that it will cash flow?

Thanks!

- Alex

[Chris Mason]

@Alexander Straffin, find a new lender. A Fannie Mae direct no overlays lender. 

SFR investment property, you can/should be able to do 15% down - but you will not particularly like the interest rate + PMI, so "there's no free lunch" applies.

If it's a BRRRrrrrrr anyways, there's a refinance in the near future, so who cares about the temporary 85% LTV interest rate and PMI.

Hell, since you know you're refinancing anyways in this scenario, you may even want to ask your local FNMA direct no overlays lender how fat of a lender credit you'd get for a ridiculously high 5% interest rate. Maybe that lender credit will be a number greater than the temporarily increased carrying costs + refinance closing costs. Let's say a refi in your area costs $3000 and the higher interest rate costs $100/month for six months. 

Let's say that high rate gets you a lender credit of $4500. $4500 - $3000 - $600 = a positive number = the B part of BRRRRRrrrr paid for one of the R parts of the BRRrr.