Final answer:
The minimum down payment for a 2-4 unit investor-owned property is 25%. This is higher than the down payment for primary residences, which can be as low as 0-3.5% but typically comes with the requirement of mortgage insurance. The correct option is A. 25%
Step-by-step explanation:
The minimum down payment required for a 2-4 unit investor-owned property is generally 25%. This higher down payment is in place because lenders view investment properties as carrying a greater risk compared to primary residences. In comparison, a home buyer purchasing a primary residence might be eligible for lower down payment options ranging from 0% to 3.5%, depending on the loan type and their personal eligibility.
However, these lower down payment options usually require purchasing mortgage insurance, which protects the lender in case of default.
For example, Ben bought a house for $100,000 as an investment property. The lender requires a 25% down payment, which equates to $25,000, so Ben would need to provide that as a down payment and borrow the remaining $75,000.
The increased down payment reflects the heightened risk associated with investment properties and ensures that the investor has more equity in the property from the outset, which reduces the risk for the lender. The correct option is A. 25%