For those looking to purchase rental properties, the minimum down payment has historically been at 20%, and so it remains. In past years, this down payment money had to be proven that it was from the buyers own resources, it could not be gifted.
In the case of an owner occupied purchase, the down payment can be (and often is) 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 now allow gifted down payment (only 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 higher being eligible for 80% financing on investment properties with no mortgage insurance premium, no fees, and 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 if the client opts to pay the mortgage insurance premium, then 80% financing is possible.
The 740 credit score relates only to the down payment amount, even for clients with a score under 740 the gifted option remains available.
This 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.