Oct 312016

For more information, please contact me at (512) 261-1542 or steve@LoneStarLending.com.

By G. Steven Bray

Since the financial collapse almost a decade ago, rental property buyers have been stuck with a minimum 20% down payment for conventional financing. Not only had Fannie Mae and Freddie Mac not forgotten about all the high-leverage loans they purchased that went bust, but the mortgage insurance companies also got burned. And for conventional financing, you need mortgage insurance to go higher than 80% leverage.

That has changed. Mortgage insurance companies have an appetite for rentals again. At this time for buyers with 680 or better credit, we’re able to accept a 15% down payment.

Of course, you’ll pay a premium for the mortgage insurance. Your MI rate would be roughly 50% higher than what one would pay when buying a primary residence. On a $200k loan, that equates to a monthly MI payment of about $102 assuming good credit. However, it only takes about 5 years to pay the loan down to 78% of the purchase price, at which point the mortgage insurance gets cancelled.

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