Hajni Cheek, Real Estate Pro in Walnut Creek, CA

Is the a difference in down payments between condos and townhouses (investment property) ?

Asked by Hajni Cheek, Walnut Creek, CA Tue May 22, 2012

I am trying to find out how much is the down payment for investment property. In January 2012 I got a pre-qualification from my bank, stating it will be 20%.
Now, 5 months later, bank says it is 25% down for all condos. Is that the same for townhouses too?
If I understood right, condos don't own the land beneath the house, while townhouses do, so I assume it is only 20% ?
Thank you!

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2
Lenders look at townhouses and condos the same way...townhouses are still condo style ownership. You should be fine with 20% down on both.
0 votes Thank Flag Link Wed May 23, 2012
You state that you went to you bank. The bank has one funding source, its own. Banks have rules one day (5 months ago) and change, sometimes, over night. This could be due to many different reasons, but it happens We call this an 'overlay'. A rule that is put in place specific to that entity. Once they are out of the game, you need to find a new lending source that has that product. This is where working with a mortgage broker or banker who have more than one funding source. We work with the banks, as well, but when they change their parameters, we work to find a source that has not put that parameter into effect.

That being said, there are still 20% down payment loans for condos. Your bank more than likely changed its parameters with condos and stated 25% down only. This is definitely an internal choice.

With our pricing, 20% down investment property will cost an additonal 1.25% in points for the same interest rate offered for 25%. Reason being? Riskier loan. More difficult to sell on the secondary market. Add the even riskier condo attachment even more difficult.

Townhouses or PUDs (Planned Unit Development) are different from condos and are treated differently by lenders and even FHA. FHA does not require a PUD to be approved where as a condo project has to go through a complete HOA project analysis. The industry feels that condos are riskier than PUDs.

It would benefit you greatly to work with an indirect lender (either a mortgage broker or banker) who can offer you more than one financing choice.
0 votes Thank Flag Link Wed May 23, 2012
Thank you Claudia! We will promptly contact your office.
Flag Fri May 25, 2012
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