Down Payment Loan

6 Replies

Can I/ is it wise to take out a hard money loan for a 20-30% down payment on a multi family home?

Kevin, hard money lenders almost always want to be in first position.  So can you?  probably not.

Is it wise?  Well, that's a moot point if you can't find a lender anyway. 

Downpayment funding is sometimes called "gap funding" (a term that a guru made up for a seminar so now it's come into common usage.)  You would usually need to find a private person for that:  I've seen gap funding from the real estate agent, the attorney, your grandmother, etc.  It's all about relationships, not hard money.

Originally posted by @Ann Bellamy :

Kevin, hard money lenders almost always want to be in first position.  So can you?  probably not.

Is it wise?  Well, that's a moot point if you can't find a lender anyway. 

Downpayment funding is sometimes called "gap funding" (a term that a guru made up for a seminar so now it's come into common usage.)  You would usually need to find a private person for that:  I've seen gap funding from the real estate agent, the attorney, your grandmother, etc.  It's all about relationships, not hard money.

 Beautifully said, thank you for the information :)

Originally posted by @Rob Brautigam :

Hey @Kevin Izquierdo, have you looked into a piggyback 80-10-10 mortgage?

 No actually. Can you please explain what that is? 

There are plenty of resources out there describing these, but basically it is a 2nd mortgage you take out to help with the typical 20% down payment.

I have not personally used one, but I know they are a viable option, as my lender and I discussed possibly using this strategy to secure a 3-unit property.

Here is an excerpt from: http://www.moneycrashers.com/piggyback-mortgage/

"80% - The first number refers to what percentage of the home’s value the primary mortgage will cover. It must be less than or equal to 80% to avoid PMI.

10% - The middle number refers to the percentage of the purchase price that will be covered by a second mortgage, home equity loan, or home equity line of credit. PMI is not required on this type of loan, but it will carry a higher interest rate than the primary mortgage.

10% - The final number refers to the amount the homeowner will need to kick in as a down payment. Again, it doesn’t have to be exactly 10%, but that amount is common."


Hopefully someone who has used one can comment on the effectiveness and some alternatives.

You might also want to look in to flex down payment. 

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