For those looking to purchase and finance rental properties, the minimum down payment has been at 20% now for some time, and so it remains. In years gone by, this down payment money had to be proven to have originated from the buyer’s own resources – it could not be gifted.
In the case of an owner occupied purchase, the down payment can be gifted from a directly related family member.
The big news from one of our key lenders at the start of July was an announcement that they would not allow gifted down payments (again from a related family member) to be applied to rental property purchases as well.
The credit score is a key focus with applicants scoring 740 and up being about to obtain 80% financing on investment properties with no mortgage insurance premium, no fees, no higher than market rates.
For those with a credit score below 740, the down payment must be increased to 25% in order to avoid the mortgage insurance premium, although with this premium 80% financing is possible.
This Rental Property Financing change is a program designed to enable the smaller investor to pool resources with other family members and get into the Real Estate market. It opens the door of opportunity for many who have otherwise been locked out of buying additional properties.