Question 1) What is the minimum down payment requirement as a percentage for Conventional investment financing and how much should I expect to pay in closing costs when purchasing a $150,000 investment property?
Conventional financing allows real estate investors to put as little as 15% down when purchasing an investment property. I am personally not a fan of the 15% down payment option and much prefer the 20% down payment options, although 15% down allows me to save 5%. I have found that the initial savings of a lesser down payment comes at a greater cost when compared over time as 20% down payment options offer a) lower interest rates b) no private mortgage insurance and c) less lender fees.
With this said, I understand everyone’s preferences are different so it’s important to ask, is reducing your down payment by 5% (in this example 5% = $7,500) worth a) a higher rate, b) private monthly mortgage insurance (aka PMI) and c) higher lender fees?
Regarding your closing costs, I assume there is a pre-existing Survey (plot of property outlining its borders) and the seller is paying for the Owners Title Policy? I also assume you are not escrowing your annual property taxes and home owners insurance within your monthly mortgage payment? If those are the case, you can expect your total closing costs to be in the (estimated) $3,000 range. If not, your costs could be more in the $4,500 range – remember that some costs are fixed and others vary on the size of the loan amount.
