I want to get my first multi-family home using an FHA Mortgage. I don’t have cash but I know I can get approved for a line of credit that would cover my down payment. Would the bank consider me a risky lender even if I have a great credit score?
I would see if you can barrow from family or friend before you consider getting a loan because your "down payment loan" will make the banks think you are extremely risky and they would think that you should not own a house. They are likely deny you for a loan.
Back in the day you could do this, but now the rules are more stringent. The 1st loan will definitely affect your debt to income ratio and then affect your chances of getting the mortgage. But because you do have good credit, I would still ask some local banks to see what they would approve you for.
You’d have to have the money seasoned in you bank account (in there for more than 60 days), the loan would also effect your DTI, I agree with the poster above, gift of equity from family member is much easier.
You cannot borrow the down payment AFAIK. Plus borrowing it would affect your DTI ratio.
It never ceases to amaze me how come so many go to the effort of getting a great income, and great credit score, but forget the most vital ingredient that Lenders might look at: their savings record! Come on, get with it, people! [Not looking at anyone in particular of course].
Having great credit, and great ability to service a 96.5% LTV mortgage, how hard can it be to save up that 3.5% deposit before buying? [That's just a generic comment for everyone]...
What about borrowing against your 401k?
Borrowing against your 401K is acceptable source. For the most part, down payment is your minimum cash investment. Essentially your “skin in the game” so it cannot be a loan from a bank, friend, family member, etc.
Free eBook from BiggerPockets!
Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!
- Actionable advice for getting started,
- Discover the 10 Most Lucrative Real Estate Niches,
- Learn how to get started with or without money,
- Explore Real-Life Strategies for Building Wealth,
- And a LOT more.
Sign up below to download the eBook for FREE today!
We hate spam just as much as you
Join the Largest Real Estate Investing Community
Basic membership is free, forever.