Buying a home can be stressful enough, and coming up with 20% for a down payment can be downright daunting. While the AIO does require a 20% down payment, I want to show you how you can get there in just 2 years by only starting with only 10%—or even 5%—down.

Let’s assume the following:

You want to buy a home for $400,000.
You can only put 10% down, ie, $40,000.
Loan amount is set for 90% LTV: $360,000.
House appreciates 5% per year: $20,000 in year one.

You buy the house, putting just 10% down. At the end of year one the house is worth $420,000.

At the end of year two the house is worth $441,000.

Your $40,000 down payment has created $41,000 in appreciation in two years. Good luck finding a stock that can give you those returns in that timeframe.

Assuming you use a 30-year loan to buy the house, by the time two years have passed, you will have paid your principal down by approximately $10,000. (You will have paid approximately $40,000 in interest; it’s painful, but hear me out.) With your house now worth $441,000, and the principal you owe at $350,000, you’re actually already at 20% equity. (80% of $441,000 is $352,800.)

At that point, we refinance you into the AIO and you’re off and running! And the next two years will see you pay down way more than a pathetic $10,000.

But what if I can only put 5% down?

It’s the same idea with a 5% down payment: You start with a $380,000 loan. You will have created $41,000 in appreciation over those first two years, having paid down approximately $10,000 in principal. You’d owe $370,000. If you could bring $18,000 cash to closing, you’d be able to refinance into the AIO and have 20% equity in your home.

We’ve worked with many clients who’ve had to take a two-step process to get into the AIO. Since we can originate any type of home loan, we’re happy to help you do the same.

Apply for any type of home loan.

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