Q: In a recent column, you were discussing the purchase of investment properties with one to four units.
Both Fannie Mae and Freddie Mac allow an investor to put as little as 10 percent down on these sorts of investment properties.
Any mortgage lender who sells to either Fannie Mae or Freddie Mac should be able to provide this type of financing. There are points that are required, and the amount is based on loan-to-value ratios and credit scores.
Also, there are several large wholesale lenders that offer zero down financing for investment properties. The selection of products is limited, and the rates and fees will be higher than normal, but they do exist.
A: Thanks for your comments. I’m often asked about “zero down” financing for investment properties because so many people read books like “Zero Down for the 2000s” or any of the other dozen or so titles that talk about financing investment real estate with little or no cash.
Thanks to electronic automatic underwriting software programs, like Fannie Mae’s Desktop Originator, and the vast numbers of creative financing techniques that have been developed over the past few years, almost no borrower is refused a loan.
If you’re planning to buy an investment property, the questions you should ask your loan officer include: How much will I have to pay each month? How much will I pay when (or if) this loan converts? What kind of credit will you give me for the rent I collect on this property? Is this a negative amortization loan and if so, how much will I owe on the loan balance when the super-low interest rate expires?
Being well-informed is a much more intelligent way to shop around for the right loan.