In the big booming real estate market, banks were willing to loan to investors 100% of the purchase price of non-owner occupied residences for whatever reason. With a 680 FICO score, a buyer could come into possession of a house he could flip or rent out. These were called 80 – 20 loans, where the buyer would get a first mortgage for 80% of the purchase price and a second mortgage for the 20% rest of the purchase price. Since property values were headed up, most people thought they could refinance easily in the future against the increased value of the home into a fixed mortgage for 80% of the value.

Unfortunately, we now know that the dream of refinancing for a lot of people never quite worked out because property values began to fall. So today, if you’re looking for a zero down investor loan, you’re not going to find it.

Banks have stopped loaning 100% purchase price mortgages even to some owner-occupied borrowers. So buying a rental with the bank’s money alone is impossible. Your best bet is to come up with at least 15% down, although 20% to 25% is better because you can avoid private mortgage insurance and, possibly, get a better cash flow on your investment.

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